Lavage Rapide is a Canadian company that owns and operates a

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs: Fixed Cost per Month Cost per Car Washed Cleaning supplies $ 0.70 Electricity $ 1,400 $ 0.07 Maintenance $ 0.30 Wages and salaries $ 4,800 $ 0.40 Depreciation $ 8,300 Rent $ 2,000 Administrative expenses $ 1,500 $ 0.03 For example, electricity costs are $1,400 per month plus $0.07 per car washed. The company expects to wash 8,000 cars in August and to collect an average of $6.30 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,100 Revenue $ 52,500 Expenses: Cleaning supplies 6,100 Electricity 1,930 Maintenance 2,640 Wages and salaries 8,360 Depreciation 8,300 Rent 2,200 Administrative expenses 1,640 Total expense 31,170 Net operating income $ 21,330 Required: Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August. (Indicate the effect of each variance by selecting \"F\" for favorable, \"U\" for unfavorable, and \"None\" for no effect (i.e., zero variance). Input all amounts as positive values.)

Solution

LAVAGE RAPIDE FLEXIBLE BUDGET PERFORMANCE REPORT - AUGUST Actual Results Revenue and spending variances Flexible budget Activity Variances Planing budget Cars Cleaned 8100 8100 8000 Revenue 52500 1470 F 51030 630 F 50400 Expenses: Cleaning Supplies 6100 430 U 5670 70 U 5600 Electricity 1930 37 F 1967 7 U 1960 Maintenance 2640 210 U 2430 30 U 2400 Salaries and wages 8360 320 U 8040 40 U 8000 Depreciation 8300 0 8300 0 U 8300 Rent 2200 200 u 2000 0 2000 Administrative exp. 1640 103 F 1743 3 U 1740 Total Expenses 31170 1020 U 30150 150 U 30000 Net Operating Income 21330 450 20880 480 F 20400 FLEXIBLE BUDGET Cars Cleaned 8100 Variable Fixed Total Per unit Total Revenue           6.30 51030 51030 Expenses: Cleaning Supplies           0.70 5670 5670 Electricity           0.07 567 1400 1967 Maintenance           0.30 2430 0 2430 Salaries and wages           0.40 3240 4800 8040 Depreciation 8300 8300 Rent 2000 2000 Administrative exp.           0.03 243 1500 1743 Total Expenses 30150 PLANNING BUDGET Cars Cleaned 8000 Variable Fixed Total Per unit Total Revenue           6.30 50400 50400 Costs: Cleaning Supplies           0.70 5600 5600 Electricity           0.07 560 1400 1960 Maintenance           0.30 2400 0 2400 Salaries and wages           0.40 3200 4800 8000 Depreciation 8300 8300 Rent 2000 2000 Administrative exp.           0.03 240 1500 1740 Total Expenses 30000