Stevie McQueen has run Lightning Car Detailing for the past 10 years. His static budget and actual results for June 2011 are provided next. Stevie has one employee who has been with him for all 10 years that he has been in business. In addition, at any given time he also employs two other less experienced workers. It usually takes each employee 2 hours to detail a vehicle, regardless of his or her experience. Stevie pays his experienced employee $40 per vehicle and the other two employees $20 per vehicle. There were no wage increases in June.

Required1. How many cars, on average, did Stevie budget for each employee? How many cars did each employee actually detail?2. Prepare a flexible budget for June 2011.3. Compute the sales price variance and the labor efficiency variance for each labor type.4. What information, in addition to that provided in the income statements, would you want Stevie to gather, if you wanted to improve operationalefficiency?

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Lightning Car Detailing Actual and Budgeted Income Statements For the Month Ended June 30, 2011 Budget 200 $30,000 Actual Cars detailed 225 Revenue $39,375 Variable costs Costs of supplies 1,500 2,250 Labor 5,600 7,100 22,900 6,000 8,250 31,125 Total variable costs Contribution margin Fixed costs 9,500 $13,400 9,500 $21,625 Operating income