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	$	1,400		$	0.06
Maintenance				$	0.25
Wages and salaries	$	4,100		$	0.30
Depreciation	$	8,200
Rent	$	1,800
Administrative expenses	$	1,400		$	0.04

For example, electricity costs are $1,400 per month plus $0.06 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.70 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
Revenue	$	58,380
Expenses:
Cleaning supplies		6,380
Electricity		1,874
Maintenance		2,340
Wages and salaries		6,980
Depreciation		8,200
Rent		2,000
Administrative expenses		1,636
Total expense		29,410
Net operating income	$	28,970

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 (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Answer 1

Answer

	Revenue & Spending Variance
Revenues	$         1,430.00	F
Expenses:
Cleaning Supplies	$             430.00	U
Electricity	$               36.00	F
Maintenance	$             215.00	U
Wages & Salaries	$             330.00	U
Depreciation	$                      -	N
Rent	$             200.00	U
Administrative expense	$             104.00	F
Total Expenses	$         1,035.00	U
Net Operating Income	$             395.00	F

--Workings

		WORKING COLUMNS					Actual Result	Revenue & Spending Variance		Flexible Budget
Cars washed							8,500			8,500
Revenues				$      6.70			$               58,380.00	$         1,430.00	F	$             56,950.00
Expenses:
Cleaning Supplies	(	$                      -	)	$      0.70	x 8500		$                 6,380.00	$             430.00	U	$               5,950.00
Electricity	(	$         1,400.00	)	$      0.06	x 8500	)	$                 1,874.00	$               36.00	F	$               1,910.00
Maintenance	(	$                      -	+	$      0.25	x 8500	)	$                 2,340.00	$             215.00	U	$               2,125.00
Wages & Salaries	(	$         4,100.00	+	$      0.30	x 8500	)	$                 6,980.00	$             330.00	U	$               6,650.00
Depreciation	(	$         8,200.00	+	$           -	x 8500		$                 8,200.00	$                      -	N	$               8,200.00
Rent	(	$         1,800.00	)	$           -	x 8500		$                 2,000.00	$             200.00	U	$               1,800.00
Administrative expense	(	$         1,400.00	+	$      0.04	x 8500	)	$                 1,636.00	$             104.00	F	$               1,740.00
Total Expenses		$      16,900.00		$      1.35			$               29,410.00	$         1,035.00	U	$             28,375.00
Net Operating Income							$               28,970.00	$             395.00	F	$             28,575.00