Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides estimates concerning the company’s costs: Fixed Cost per Month Cost per Car Washed Cleaning supplies $ 0.70 Electricity $ 1,400 $ 0.09 Maintenance $ 0.10 Wages and salaries $ 4,500 $ 0.30 Depreciation $ 8,100 Rent $ 1,800 Administrative expenses $ 1,800 $ 0.01 For example, electricity costs should be $1,400 per month plus $0.09 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.80 per car washed. The actual operating results for August are as follows: Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,600 Revenue $ 59,900 Expenses: Cleaning supplies 6,450 Electricity 2,135 Maintenance 1,090 Wages and salaries 7,410 Depreciation 8,100 Rent 2,000 Administrative expenses 1,785 Total expense 28,970 Net operating income $ 30,930 Required: Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August. Note: 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.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.1.1P: Budget performance report for a cost center Sneed Industries Company sells vehicle parts to...

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Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides estimates concerning the company’s costs:

	Fixed Cost per Month	Cost per Car Washed
Cleaning supplies		$ 0.70
Electricity	$ 1,400	$ 0.09
Maintenance		$ 0.10
Wages and salaries	$ 4,500	$ 0.30
Depreciation	$ 8,100
Rent	$ 1,800
Administrative expenses	$ 1,800	$ 0.01

For example, electricity costs should be $1,400 per month plus $0.09 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.80 per car washed.

The actual operating results for August are as follows:

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed	8,600
Revenue	$ 59,900
Expenses:
Cleaning supplies	6,450
Electricity	2,135
Maintenance	1,090
Wages and salaries	7,410
Depreciation	8,100
Rent	2,000
Administrative expenses	1,785
Total expense	28,970
Net operating income	$ 30,930

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August.

Note: 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.

Cars washed
Revenue
Expenses:
Cleaning supplies
Electricity
Maintenance
Wages and salaries
Depreciation
Rent
Administrative expenses
Total expense
Net operating income
Actual
Results
$
Lavage Rapide
Flexible Budget Performance Report
For the Month Ended August 31
$
8,600
59,900
6,450
2,135
1,090
7,410
8,100
2,000
1,785
28,970
30,930
Flexible
Budget
Planning
Budget

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