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				$	0.60
Electricity	$	1,100		$	0.05
Maintenance				$	0.15
Wages and salaries	$	4,700		$	0.20
Depreciation	$	8,300
Rent	$	2,000
Administrative expenses	$	1,500		$	0.03

For example, electricity costs are $1,100 per month plus $0.05 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.00 per car washed.

The actual operating results for August are as follows:

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed		8,200
Revenue	$	50,700
Expenses:
Cleaning supplies		5,360
Electricity		1,475
Maintenance		1,455
Wages and salaries		6,680
Depreciation		8,300
Rent		2,200
Administrative expenses		1,643
Total expense		27,113
Net operating income	$	23,587

Required:

Calculate the company's revenue and spending variances for August.

Answer 1

	Actual Results	Flexible Budget	Flexible Budget Variance
Cars Washed	8200	8200
Revenue	$         50,700	$            49,200	$            1,500	F
Expenses
Cleaning Supplies	$           5,360	$              4,920	$                440	U
Electricity	$           1,475	$              1,510	$                  35	F
Maintenance	$           1,455	$              1,230	$                225	U
Wages and Salaries	$           6,680	$              6,340	$                340	U
Depreciation	$           8,300	$              8,300	$                   -	None
Rent	$           2,200	$              2,000	$                200	U
Administrative Expenses	$           1,643	$              1,746	$                103	F
Total Expenses	$         27,113	$            26,046	$            1,067	U
Net Operating Income	$         23,587	$            23,154	$                433	F