Exercise 9-13 Revenue and Spending Variances [LO9-3] Lavage Rapide is a Canadian

Question

Exercise 9-13 Revenue and Spending Variances [LO9-3]

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 $1,100 per month plus $0.08 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $5.90 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 $ 0.70 Electricity $ 1,100 $ 0.08 Maintenance $ 0.10 Wages and salaries $ 4,300 $ 0.30 Depreciation $ 8,300 Rent $ 2,100 Administrative expenses $ 1,400 $ 0.02

Explanation / Answer

Flexible budget Actual Revenue and spending variances Cars washed 8300 8300 Revenue 48970 50480 1510 F Expenses: Cleaning supplies 5810 6240 430 U Electricity 1764 1726 38 F Maintenance 830 1060 230 U Wages and salaries 6790 7120 330 U Depreciation 8300 8300 0 None Rent 2100 2300 200 U Administrative expenses 1566 1464 102 F Total expenses 27160 28210 1050 U Net operating income 21810 22270 460 F

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