Question

Last month, the budgeted level of activity was 1,090 cars washed and the actual level of activity was 1,080 cars washed. The cost formula for the washing expenses is $3.30 per car washed plus $18,500 per month.

Fixed cost per month Cost per car washed
Cleaning supplies $0.70
Electricity $1,300 $0.08
Maintenance $0.15
wages and salaries $4,900 $0.20
Depreciation $8,400
Rent $1,900
Administrative expenses $1,600 $0.05

For example. electricity costs are $1,300 per month plus $0.08 per car washed. The company expects to wash 8,000 cars in August and to collect an average Of $6.60 per car washed.
The actual operating results for August appear below.


Lavage Rapide Income Statement For the Month Ended August 31

Actual car washed 8100
Revenue 54,900

Expenses:
Cleaning supplies 6,100
Electricity 1910
Maintenance 1,440
Wages and salaries 6860
Depreciation 8,400
Rent 2100
Administrative expenses 1,900
Total expense 28170
Net operating income 26,190


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

Answer 1

Flexible Budget Performance Report for August:

Flexible Actual Variances

Budget Budget Spending Activity Total

Activity levels 8,100 8,100

Revenue $53,460 $54,900 $1,440

Cleaning supplies $5,670 $6,100 (430)

Electricity $1,948 1,910 38

Maintenance $1,215 1,440 (225)

Wages and salaries $6,520 6,860 (340)

Administrative expenses $2,005 1,900 105

Depreciation $8,400 8,400 0

Rent $1,900 2,100 ($200)

Total expenses $27,658 $28,170 ($200) ($852) (1,052)

Net operating income $25,802 $26,190 $388

Step-by-step explanation:

a) Data and Calculations:

Fixed cost Cost per

per month car washed

Cleaning supplies $0.70

Electricity $1,300 $0.08

Maintenance $0.15

Wages and salaries $4,900 $0.20

Depreciation $8,400

Rent $1,900

Administrative expenses $1,600 $0.05

Total costs $18,100 $1.18

Flexible costs:

Cleaning supplies $0.70 * 8,100 = $5,670

Electricity $1,300 $0.08 * 8,100 = $1,948

Maintenance $0.15 * 8,100 = $1,215

Wages and salaries $4,900 $0.20 * 8,100 = $6,520

Administrative expenses $1,600 $0.05 * 8,100 = $2,005