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		$0.70
Electricity	$1400	$0.06
Maintenance		$0.15
Wages and salaries	$4500	$0.40
Depreciation	$8500
Rent	$1900
Administrative expenses	$1600	$0.04

For example, electricity costs are $1400 per month plus $0.06 per car washed. The company expects to wash 8200 in August and to collect an average of $6.10 per car washed.

The actual operating results for August appear below.

Lavage Rapide Income Statement For the month ended August 31
Actual Cars Washed	8300
Revenue	$52120
Expenses:
Cleaning supplies	6240
Electricity	1862
Maintenance	1470
Wages and salaries	8140
Depreciation	8500
Rent	2100
Administration expenses	1828
Total expense	30140
Net operating income	$21980

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

Answer 1

		Revenue and Spending variance
		Actual	Flexible	Revenue & spending
		Result	budget	variance
Revenue		52,120	50630	1,490	F
Expenses
Cleaning supplies		6,240	5810	430	U
Electricity		1,862	1898	36	F
Maintenance		1,470	1245	225	U
Wages and salaries		8,140	7820	320	U
Depreciation		8,500	8,500	0	N
Rent		2,100	1,900	200	U
Administrative expenses		1,828	1,932	104	F
total expense		30,140	29,105	1,035	U
net operating income		21,980	21,525	455	F