Question

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 Costs Per Month	Cost Per Car Washed
Cleaning Supplies		.70
Electricity	1,100	.09
Maintenance		.15
Wages And Salary	4,600	.30
Depreciation	8,100
Rent	2,000
Admin. Expense	1,300	.04

For example, electricity costs are $1,100 per month plus $0.09 per car washed. The company expected to wash 8,300 cars in August and to collect an average of $6.50 per car washed.

The actual operating results for August appear below.

Lavage Rapide Income Statement For the Month Ended August 31
Actual cars washed		8,400
Revenue	$	56,050
Expenses:
Cleaning supplies		6,310
Electricity		1,817
Maintenance		1,485
Wages and salaries		7,450
Depreciation		8,100
Rent		2,200
Administrative expenses		1,532
Total expense		28,894
Net operating income	$	27,156

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 RIPIDE
Revenue and Spending variance
for the month ended August 31
	Expected	Budgeted	Variance
Car Wash (Units)	8,300	8,400	(100)
Revenues	$      53,950.00	$      56,050.00	$ 2,100.00 U
Expenses:
Cleaning supplies	$         5,810.00	$        6,310.00	$ 500.00 U
Electricity	$         1,847.00	$        1,817.00	$ 30.00 F
Maintenance	$         1,245.00	$        1,485.00	$ 240.00 U
Wages & Salaries	$         7,090.00	$        7,450.00	$ 360.00 U
Depreciation	$         8,100.00	$        8,100.00	$ 0.00 None
Rent	$         2,000.00	$        2,200.00	$ 200.00 U
Administrative expense	$         1,632.00	$        1,532.00	$ 100.00 F
Total expenses	$      27,724.00	$      28,894.00	$ 1,170.00 U
Net Operating Income	$      26,226.00	$      27,156.00	$ 930.00 U