Question

2 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 Electricity $8.5e $e.e9 $e.1e $e,3e $1,see Maintenance $4, 20e $8,20e $2,eee $1,7ee Wages and salaries Depreciation Rent Administrative expenses $0.02 For example, electricity costs are $1,500 per month plus $0.09 per car washed. The company expects to wash 8,100 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 8,200 Actual cars washed Revenue $se,7ee Expenses: Cleaning supplies Electricity Maintenance 4,550 2,199 1,ese 6,990 8, 280 2,28e 1,762 26,951 Wages and salaries Depreciation Rent Administrative expenses Total expense $23,749 Net operating income Requlred: Calculate the company's revenue and spending variances for August. (Indicate the effect of each varience by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (l.e., zero veariance). Input all amounts as positive values.) Lavage Rapide Revenue and Spending Variances For the Month Ended August 31 Revenue Expenses Cleaning supplies F Electricity Maintenance None Wages and salaries U Depreciation Rent Administrative expenses Total expense Net operating income

Answer 1

Solution:

2.)

Lavage Rapide

Income statement

For the Month Ended August 31

Particulars	Budgeted	Actual	Variance	Variance Status
Actual cars washed	8,100	8,200	100	F
Revenue	$48,600(8,100 cars ×$6)	$50,700	$2,100	F
Expenses
Cleaning supplies	$4,050	$4,550	$(500)	U
Electricity	$2,229(8,100 ×$0.09+1,500)	$2,199	$30	F
Maintenance	$810(8100 ×$0.10)	$1,050	$(240)	U
Wages and salaries	$4200	$6900	$(2,700)	U
Depreciation	$8,200	$8,200	0	None
Rent	$2,000	$2,200	$(200)	U
Administrative	$1,862($1,700+8,100 ×0.0.2)($1,700 +$162)	$1,762	$100	F
Total expenses	$23,351	$24,661	$(1,310)	U
Net operating income	$25,249	$26,039		F

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