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				$	0.80
Electricity	$	1,200		$	0.09
Maintenance				$	0.15
Wages and salaries	$	4,700		$	0.30
Depreciation	$	8,100
Rent	$	2,000
Administrative expenses	$	1,500		$	0.04

For example, electricity costs are $1,200 per month plus $0.09 per car washed. The company expects to wash 8,000 cars in August and to collect an average of $6.80 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		8,100
Revenue	$	56,500
Expenses:
Cleaning supplies		6,900
Electricity		1,890
Maintenance		1,440
Wages and salaries		7,460
Depreciation		8,100
Rent		2,200
Administrative expenses		1,720
Total expense		29,710
Net operating income	$	26,790

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.)

Brewer_8e_Rechecks_2019_10_17

Answer 1

Answer-

LAVAGE RAPIDE
FLEXIBLE BUDGET PERFORMANCE REPORT
FOR THE MONTH ENDED AUGUST 31
PARTICULARS	REVENUE & SPENDING VARIANCE	REMARK	ACTIVITY VARIANCE	REMARK
	$		$
Revenue	1420	Favorable	680	Favorable
Less:-Expenses
Cleaning expenses	-420	Unfavorable	-80	Unfavorable
Electricity	39	Favorable	-9	Unfavorable
Maintenance	-225	Unfavorable	-15	Unfavorable
Wages & salaries	-330	Unfavorable	-30	Unfavorable
Depreciation	0	None	0	None
Rent	-200	Unfavorable	0	None
Administrative expenses	104	Favorable	-4	Unfavorable
Total Expenses	-1032	Unfavorable	-138	Unfavorable
Income from opreations	388	Favorable	542	Favorable

Explanation-

Lavage Rapide
Revenue & Spending Variances
For the month ended August 31
Particulars		Flexible Budget	Actual Results	Variances	Remark
		$	$	$
Revenue	8100 car washed*$6.80 per car washed	55080	56500	1420	Favorable
Less:-Expenses
Cleaning expenses	8100 car washed*$0.80 per car washed	6480	6900	-420	Unfavorable
Electricity	(8100 car washed*$0.09 per car washed)+$1200	1929	1890	39	Favorable
Maintenance	8100 car washed*$0.15 per car washed	1215	1440	-225	Unfavorable
Wages & salaries	(8100 car washed*$0.30 per car washed)+$4700	7130	7460	-330	Unfavorable
Depreciation		8100	8100	0	None
Rent		2000	2200	-200	Unfavorable
Administrative expenses	(8100 car washed*$0.04 per car washed)+$1500	1824	1720	104	Favorable
Total expenses		28678	29710	-1032	Unfavorable
Income from operations		26402	26790	388	Favorable
Lavage Rapide
Activity Variances
For the month ended August 31
Particulars	Planning Budget	Flexible Budget	Variances	Remark
		$	$
Revenue	8000 car washed*$6.80 per car washed =$54400	55080	680	Favorable
Less:-Expenses
Cleaning expenses	8000 car washed*$0.80 per car washed= $6400	6480	-80	Unfavorable
Electricity	(8000 car washed*$0.09 per car washed)+$1200= $1920	1929	-9	Unfavorable
Maintenance	8000 car washed*$0.15 per car washed= $1200	1215	-15	Unfavorable
Wages & salaries	(8000 car washed*$0.30 per car washed)+$4700= $7100	7130	-30	Unfavorable
Depreciation	8100	8100	0	None
Rent	2000	2000	0	None
Administrative expenses	(8000 car washed*$0.04 per car washed)+$1500= $1820	1824	-4	Unfavorable
Total expenses	28540	28678	-138	Unfavorable
Income from opreations	25860	26402	542	Favorable