Question

In: Accounting

avage Rapide is a Canadian company that owns and operates a large automatic carwash facility near...

avage Rapide is a Canadian company that owns and operates a large automatic carwash 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 $ 1,300      $ 0.09     
  Maintenance       $ 0.25     
  Wages and salaries $ 5,000      $ 0.20     
  Depreciation $ 8,200           
  Rent $ 1,900           
  Administrative expenses $ 1,700      $ 0.04     

For example, electricity costs are $1,300 per month plus $0.09 per car washed. The company expected to wash 8,400 cars in August and to collect an average of $6.10 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 $ 53,340   
  Expenses:
      Cleaning supplies 5,540   
      Electricity 2,026   
      Maintenance 2,340   
      Wages and salaries 7,040   
      Depreciation 8,200   
      Rent 2,100   
      Administrative expenses 1,936   
  Total expense 29,182   
  Net operating income $ 24,158   

Required:

Compute 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.)

Lavage Rapide
Revenue and Spending Variances
For the Month Ended August 31
Revenue
Expenses:
Cleaning supplies
Electricity
Maintenance
Wages and salaries
Depreciation
Rent
Administrative expenses ..... .....
Total expense
Net operating income

Solutions

Expert Solution

Lavage Rapide
Revenue and Spending Variances
For the Month Ended August 31
Actual Flexible Variance F/U
Revenue $53,340.00 $ 51,240.00 $    2,100.00 F
Expenses:
Cleaning supplies $ 5,540.00 $ 5,040.00 $        500.00 U
Electricity $ 2,026.00 $ 2,056.00 $        (30.00) F
Maintenance $ 2,340.00 $ 2,100.00 $        240.00 U
Wages and salaries $ 7,040.00 $ 6,680.00 $        360.00 U
Depreciation $ 8,200.00 $ 8,200.00 $                 -  
Rent $ 2,100.00 $ 1,900.00 $        200.00 U
Administrative expenses $ 1,936.00 $ 2,036.00 $     (100.00) F
Total expense $29,182.00 $ 28,012.00 $    1,170.00 U
Net operating income $24,158.00 $ 23,228.00 $        930.00 U
Calculation of Flexible Budget
Fixed Cost rate Flexible Budget (8400)
Revenue $            6.10 $ 51,240.00
Expenses:
Cleaning supplies $            0.60 $    5,040.00
Electricity $   1,300.00 $            0.09 $    2,056.00
Maintenance $            0.25 $    2,100.00
Wages and salaries $   5,000.00 $            0.20 $    6,680.00
Depreciation $   8,200.00 $    8,200.00
Rent $   1,900.00 $    1,900.00
Administrative expenses $   1,700.00 $            0.04 $    2,036.00
Total expense $ 28,012.00
Net operating income $ 23,228.00

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