## Answers

Actual | Revenue/Spending Variance | Flexible | ||

Cars washed | 8,800 | 8,800 | ||

Revenue | $43,080 | $40 | U | $43,120 |

Expenses: | ||||

Cleaning supplies | $7,560 | $520 | U | $7,040 |

Electricity | $2,670 | $150 | U | $2,520 |

Maintenance | $2,260 | $500 | U | $1,760 |

Wages and salaries | $8,500 | $860 | U | $7,640 |

Depreciation | $6,000 | $0 | None | $6,000 |

Rent | $8,000 | $0 | None | $8,000 |

Administrative expenses | $4,950 | $70 | U | $4,880 |

Total expenses | $39,940 | $2,100 | U | $37,840 |

Net operating income | $3,140 | $2,140 | U | $5,280 |

Revenue or spending variance = Actual budget - Flexible budget

If Actual revenue and Net operating income is more than the flexible then it is Favorable (F). Otherwise Unfavorabel (U)

If Actual Expenses are less than the flexible then it is Favorable (F). Otherwise Unfavorable (U).

*Calculations:*

*Flexible budget*

Flexible budget (8,800 cars washed) | |||||||

Cars washed | x | Variable unit cost | = | Total variable cost (i) | Fixed cost (ii) | Total (i) + (ii) | |

Revenue | 8,800 | $4.90 | = | $43,120 | $43,120 | ||

Cleaning supplies | 8,800 | x | $0.80 | = | $7,040 | $7,040 | |

Electricity | 8,800 | x | $0.15 | = | $1,320 | $1,200 | $2,520 |

Maintenance | 8,800 | x | $0.20 | = | $1,760 | $1,760 | |

Wages and salaries | 8,800 | x | $0.30 | = | $2,640 | $5,000 | $7,640 |

Depreciation | 8,800 | x | $6,000 | $6,000 | |||

Rent | 8,800 | x | $8,000 | $8,000 | |||

Administrative expenses | 8,800 | x | $0.10 | = | $880 | $4,000 | $4,880 |

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