Question

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company’s costs:

	Fixed Cost per Month			Cost per Car Washed
Cleaning supplies				$	0.80
Electricity	$	1,200		$	0.15
Maintenance				$	0.20
Wages and salaries	$	5,000		$	0.30
Depreciation	$	6,000
Rent	$	8,000
Administrative expenses	$	4,000		$	0.10

For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company expects to wash 9,000 cars in August and to collect an average of $4.90 per car washed.

The actual operating results for August are as follows:

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed		8,800
Revenue	$	43,080
Expenses:
Cleaning supplies		7,560
Electricity		2,670
Maintenance		2,260
Wages and salaries		8,500
Depreciation		6,000
Rent		8,000
Administrative expenses		4,950
Total expense		39,940
Net operating income	$	3,140

Required:

Calculate the company's revenue and spending variances for August. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Answer 1

Solution:

C D G 1 2 3 4 Lavage Rapide Revenue and spending Variances For the month ended August 31 5 6 Revenue and spending Flexible Budget 7 Particulars Actual results variances 8800 8800 8 Car Washed 9 $43,120.00 $43,080.00 $40.00 U 10 Revenue Expenses: Cleaning Supplies Electricity Maintenance 11 $7,560.00 $2,670.00 $2,260.00 $8,500.00 $6,000.00 $8,000.00 $4,950.00 $39,940.00 $7,040.00 $2,520.00 $1,760.00 $7,640.00 $6,000.00 $520.00 U $150.00 U $500.00 U 12 13 14 Wages and Salaries Depreciation $860.00 U $0.00 None $0.00 None $70.00U $2,100.00 U 15 16 $8,000.00 17 Rent Administrative expenses Total Expenses $4,880.00 $37,840.00 18 19 20 $2,140.00 U $3,140.00 $5,280.00 Net Operating Income 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 383 (4) Sheet786 (2) Sheet738 Sheet750 Sheet754