Marcus McQueen has run In-A-Flash Car Detailing for the past 10 years. His static budget and actual results for June 2020 are provided next. Marcus 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. Marcus pays his experienced employee $30 per vehicle and the other two employees $15 per vehicle. There were no wage increases in June.

Required

1. How many cars, on average, did Marcus budget for each employee? How many cars did each employee detail?
2. Prepare a flexible budget for June 2020.
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 Marcus to gather, if you wanted to improve operational efficiency?

Transcribed Image Text:

In-A-Flash Car Detailing Actual and Budgeted Income Statements For the Month Ended June 30, 2020 Cars detailed Revenue Variable costs: Costs of supplies Labor Total variable costs Contribution margin Fixed costs Operating income Budget 280 $53,200 1,260 6,720 7,980 45,220 9,800 $35,420 Actual 320 $72,000 1,360 8,400 9,760 62,240 9,800 $52,440