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	$	1,400		$	0.08
Maintenance				$	0.15
Wages and salaries	$	4,200		$	0.20
Depreciation	$	8,400
Rent	$	2,000
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 8,000 cars in August and to collect an average of $6.90 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	$	57,300
Expenses:
Cleaning supplies		6,900
Electricity		2,010
Maintenance		1,440
Wages and salaries		6,160
Depreciation		8,400
Rent		2,200
Administrative expenses		1,920
Total expense		29,030
Net operating income	$	28,270

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