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 $ 0.50 Electricity $ 1,300 $ 0.09 Maintenance $ 0.10 Wages and salaries $ 4,500 $ 0.30 Depreciation $ 8,300 Rent $ 2,000 Administrative expenses $ 1,700 $ 0.03
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 $ 0.50 Electricity $ 1,300 $ 0.09 Maintenance $ 0.10 Wages and salaries $ 4,500 $ 0.30 Depreciation $ 8,300 Rent $ 2,000 Administrative expenses $ 1,700 $ 0.03
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 data concerning the company’s costs:
| Fixed Cost per Month |
Cost per Car Washed |
|||||
| Cleaning supplies | $ | 0.50 | ||||
| Electricity | $ | 1,300 | $ | 0.09 | ||
| Maintenance | $ | 0.10 | ||||
| Wages and salaries | $ | 4,500 | $ | 0.30 | ||
| $ | 8,300 | |||||
| Rent | $ | 2,000 | ||||
| Administrative expenses | $ | 1,700 | $ | 0.03 | ||
For example, electricity costs are $1,300 per month plus $0.09 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.50 per car washed.
The actual operating results for August appear below.
| Lavage Rapide | ||
| Income Statement | ||
| For the Month Ended August 31 | ||
| Actual cars washed | 8,300 | |
| Revenue | $ | 55,400 |
| Expenses: | ||
| Cleaning supplies | 4,600 | |
| Electricity | 2,008 | |
| Maintenance | 1,060 | |
| Wages and salaries | 7,320 | |
| Depreciation | 8,300 | |
| Rent | 2,200 | |
| Administrative expenses | 1,846 | |
| Total expense | 27,334 | |
| Net operating income | $ | 28,066 |
Required:
Prepare a flexible budget performance report that shows the company’s revenue and spending variances and activity variances for August.
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