FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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       $ 0.80  
Electricity $ 1,100   $ 0.05  
Maintenance       $ 0.30  
Wages and salaries $ 4,800   $ 0.20  
Depreciation $ 8,200        
Rent $ 1,900        
Administrative expenses $ 1,700   $ 0.03  
 

 

For example, electricity costs are $1,100 per month plus $0.05 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.50 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   8,500
     
Revenue $ 56,700
Expenses:  
Cleaning supplies   7,220
Electricity   1,490
Maintenance   2,760
Wages and salaries   6,840
Depreciation   8,200
Rent   2,100
Administrative expenses   1,852
Total expense   30,462
Net operating income $ 26,238
 

 

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.)

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