Auto Lavage is a Canadian company that owns and operates a large automatic carwash facility near Quebec. The following table provides data concerning the company's costs:
|
Fixed Cost
per Month |
|
Cost per
Car Washed |
| Cleaning supplies |
|
|
|
$ |
0.40 |
| Electricity |
$ |
1,100 |
|
$ |
0.08 |
| Maintenance |
|
|
|
$ |
0.10 |
| Wages and salaries |
$ |
4,300 |
|
$ |
0.20 |
| Depreciation |
$ |
8,200 |
|
|
|
| Rent |
$ |
2,200 |
|
|
|
| Administrative expenses |
$ |
1,700 |
|
$ |
0.01 |
|
|
For example, electricity costs are $1,100 per month plus $0.08 per car washed. The company expects to wash 8,300 cars in October and to collect an average of $5.90 per car washed.
|
| The actual operating results for October appear below: |
Auto Lavage
Income Statement
For the Month Ended October 31 |
| Actual cars washed |
|
8,400 |
| Revenue |
$ |
51,070 |
|
|
|
| Expenses: |
|
| Cleaning supplies |
|
3,820 |
| Electricity |
|
1,734 |
| Maintenance |
|
1,070 |
| Wages and salaries |
|
6,320 |
| Depreciation |
|
8,200 |
| Rent |
|
2,400 |
| Administrative expenses |
|
1,683 |
|
|
|
| Total expense |
|
25,227 |
|
|
|
| Net operating income |
$ |
25,843 |
|
|
|
|