Lavage Rapide is a Canadian company that owns and operates a large automatic car

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:

For example, electricity costs are $1,500 per month plus $0.08 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.20 per car washed.

The actual operating results for August appear below.

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.)

Fixed Cost
per Month Cost per
Car Washed Cleaning supplies $ 0.60 Electricity $ 1,500 $ 0.08 Maintenance $ 0.10 Wages and salaries $ 4,800 $ 0.20 Depreciation $ 8,100 Rent $ 1,800 Administrative expenses $ 1,400 $ 0.03 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

Explanation / Answer

Revenue and spending variance :

Revenue 1480 F Expense Cleaning supplies 440 U Electricity 38 F Maintenance 230 U Wages and salaries 340 U Depreciation 0 None Rent 200 U Administrative expense 103 F Total expense 1069 U Net operating income 411 F

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