Question

1.

value:
10.00 points

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

Fixed Cost per Month

Cost per Car Washed

Cleaning supplies				$	0.60
Electricity	$	1,000		$	0.10
Maintenance				$	0.20
Wages and salaries	$	4,400		$	0.30
Depreciation	$	8,400
Rent	$	1,800
Administrative expenses	$	1,500		$	0.04

  

For example, electricity costs are $1,000 per month plus $0.10 per car washed. The company expected to wash 8,200 cars in August and to collect an average of $6.20 per car washed.

  

The actual operating results for August appear below.

  

Lavage Rapide Income Statement For the Month Ended August 31
Actual cars washed		8,300
Revenue	$	52,940
Expenses:
Cleaning supplies		5,420
Electricity		1,790
Maintenance		1,880
Wages and salaries		7,220
Depreciation		8,400
Rent		2,000
Administrative expenses		1,728
Total expense		28,438
Net operating income	$	24,502

  

Required:

Compute 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

Lavage Rapide Revenue and spending variance For the Month Ended August 31
Revenue	$1480 F
Expenses:
Cleaning supplies	440 U
Electricity	40 F
Maintenance	220 U
Wages and salaries	330 U
Depreciation	0 None
Rent	200 U
Administrative expenses	104 F
Total expense	1046 U
Net operating income	$434 F