Question

In: Accounting

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...

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 $ 0.50
Electricity $ 1,400 $ 0.09
Maintenance $ 0.25
Wages and salaries $ 4,100 $ 0.30
Depreciation $ 8,300
Rent $ 1,800
Administrative expenses $ 1,700 $ 0.03

For example, electricity costs are $1,400 per month plus $0.09 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.00 per car washed.

The actual operating results for August appear below.

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed 8,600
Revenue $ 53,100
Expenses:
Cleaning supplies 4,750
Electricity 2,135
Maintenance 2,365
Wages and salaries 7,010
Depreciation 8,300
Rent 2,000
Administrative expenses 1,855
Total expense 28,415
Net operating income $ 24,685

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.)

Solutions

Expert Solution

Solution:

Lavage Rapide
Revenue and spending Variances
For the month ended August 31
Particulars Actual results Flexible Budget Revenue and spending variances
Car Washed 8600 8600
Revenue $53,100.00 $51,600.00 $1,500.00 F
Expenses:
Cleaning Supplies $4,750.00 $4,300.00 $450.00 U
Electricity $2,135.00 $2,174.00 $39.00 F
Maintenance $2,365.00 $2,150.00 $215.00 U
Wages and Salaries $7,010.00 $6,680.00 $330.00 U
Depreciation $8,300.00 $8,300.00 $0.00 None
Rent $2,000.00 $1,800.00 $200.00 U
Administrative expenses $1,855.00 $1,958.00 $103.00 F
Total Expenses $28,415.00 $27,362.00 $1,053.00 U
Net Operating Income $24,685.00 $24,238.00 $447.00 F


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