Question

Lavage Rapide is a Canadian company that owns and operatos a large automatic carwash facility near Montreal. The following table provides data conce company's costs: Fixed Cost per Month Cost per Car Washed $ 0.60 $ 0.07 $ 0.30 $ 0.30 Cleaning supplies Electricity Wages and salaries Rent $ 1,300 $ 4,600 $ 8,100 $ 2,100 S 1,600 Administrative expenses $ 0.01 For example, electrity costs are $1.300 per month plus $0.07 per car washod. The company expected to wash 8,500 cars in August and to collect an average of $6.10 por car washed. The actual operating results for August appear below. Lavage Rapide income Statement For the Month Ended August 31 Actual cars washed Revenue B,600 $ 53,960 Expenses: Cleaning supplies Electricity Mairtenance Wages and salaries Depreciation Rent 5,600 866 2,700 ,510 8,100 2,300 1,585 dministrative expenses Total expense Net operating income 29,750 24 200 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.) Lavage Rapide Revenue and Spending Variances For the Month Ended August 31 Revenue Expenses Cleaning supplies Electricity Wages and salanies Rent Administrative expenses Total expense Net operating income

Answer 1

Lavage Rapide Workings: Revenue and Spending Variances Flexible ActuaVariance For the Month Ended August 31 Actual cars washed Revenues Expenses 8,600 $52,460 $53,950 8,600 Revenue $1,490 F $1,490 - -> (a) Expenses Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expense Total Expenses $440 U $37 F $210 U $330 U $5,160 $5,600 $1,902 $1,865 $2,580 $2,790 7,180 $7,510 $8,100 $8,100 2,100 $2,300 Administrative expense $1,686 $1,585 $28,708 $29,750 3,752 $24,200 Cleaning supplies Electricity Maintenance Wages and salarie:s Depreciation Rent $A40 -$37 $210 $330 $0 None $0 $200 $101 $200 U $101 F $1,042 U $448 F $1,042 >(b) Total Expenses Net Operating Income Net Operating Income $2 S448 >(a) (b)

NOTE U -->Unfavorable; F -->Favorable; None-->No Variance For Revenues & Net Operating income, if actual is higher than flexible budget, it is favorable otherwise unfavorable; Accordingly, U & F are assigned against each line item in the Revenue and Spending Variances Report presented above Flexible for Revenue-8,600 x $0.10-$52,460; Cleaning supplies-8,600 x $0.60 = $5,160; Electricity = $1,300 + (8,600 x $0.07)-$1,902; Maintenance 8,600 x $0.30 $2,580; Wages and salaries $4,600(8,600 x $0.30) $7,180; Depreciation $8,100 (fixed); Rent $2,100 (fixed); Administrative expense $1,600+(8,600 x $0.01