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 $1,300 cleaning supplies Electricity Maintenance Wages and salaries Depreciation Cost per Car Washed $0.70 $0.07 $0.10 $0.30 $4,100 $8,100 $1,900 $1,600 Administrative expenses $0.04 For example, electricity costs are $1,300 per month plus $0.07 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.00 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,500 $ 52.500 Revenue Expenses! cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expenses Total expense Net operating income 6,380 1,858 1,080 6.990 8,100 2.100 1836 2334 24,166 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 (.e., zero variance). Input all amounts as positive values.) Lavage Rapide Revenue and Spending Variances For the Month Ended August 31 Revenue Expenses: Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expenses Total expense Net operating income

Answer 1

Solution

Working

Lavage Rapide
Revenues and Spending Variance
For the Month ended August 31
Revenue	$ 1,500.00	F
Expenses:
Cleaning supplies	$ 430.00	U
Electricity	$ 37.00	F
Maintenance	$ 230.00	U
Wages and salaries	$ 330.00	U
Depreciation	$ 0.00	None
Rent	$ 200.00	U
Administrative expenses	$ 104.00	F
Total Expenses	$ 1,049.00	U
Net Operating Income	$ 451.00	F

Working

	Units (A)	Fixed cost (B)	Variable cost per unit ©	Flexible cost and revenue (D=(A x C) +B)
Revenue	8500		$       6.00	$ 51,000.00
Expenses:	8500
Cleaning supplies	8500	$               -	$       0.70	$    5,950.00
Electricity	8500	$ 1,300.00	$       0.07	$    1,895.00
Maintenance	8500	$               -	$       0.10	$        850.00
Wages and salaries	8500	$ 4,100.00	$       0.30	$    6,650.00
Depreciation	8500	$ 8,100.00		$    8,100.00
Rent	8500	$ 1,900.00		$    1,900.00
Administrative expenses	8500	$ 1,600.00	$       0.04	$    1,940.00
Total Expenses				$ 27,285.00
Net Operating Income				$ 23,715.00