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 $ 0.08 Maintenance $ 0.15 Wages and salaries $ 4,300 $ 0.40 Depreciation $ 8,300 Rent $ 2,200 Administrative expenses $ 1,700 $ 0.04 For example, electricity costs are $1,400 per month plus $0.08 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.80 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 $ 59,220 Expenses: Cleaning supplies 6,380 Electricity 2,042 Maintenance 1,500 Wages and salaries 8,020 Depreciation 8,300 Rent 2,400 Administrative expenses 1,936 Total expense 30,578 Net operating income $ 28,642 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.)

Answer 1

Lavage Rapide
Revenue and Spending Variances
For the Month Ended August 31
	Actual Results	Flexible Budget	Revenue and Spending Variances
Cars washed (q)	$                       8,500.00	$                          8,500.00
Revenue ($6.80q)	$                    59,220.00	$                       57,800.00	$                                                 1,420.00	F
Expenses :
Cleaning supplies ($0.70q)	$                       6,380.00	$                          5,950.00	$                                                     430.00	U
Electricity ($1,400 + $0.08q)	$                       2,042.00	$                          2,080.00	$                                                       38.00	F
Maintenance ($0.15q)	$                       1,500.00	$                          1,275.00	$                                                     225.00	U
Wages and salaries ($4,300 + $0.40q)	$                       8,020.00	$                          7,700.00	$                                                     320.00	U
Depreciation ($8,300)	$                       8,300.00	$                          8,300.00	$                                                              -
Rent ($2,200)	$                       2,400.00	$                          2,200.00	$                                                     200.00	U
Administrative expenses($1,700 + $0.04q)	$                       1,936.00	$                          2,040.00	$                                                     104.00	F
Total expense	$                    30,578.00	$                       29,545.00	$                                                 1,033.00
Net operating income	$                    28,642.00	$                       28,255.00	$                                                     387.00	F