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: Fixed Cost per Month Cost per Car Washed Cleaning supplies $ 0.50 Electricity $ 1,100 $ 0.05 Maintenance $ 0.30 Wages and salaries $ 4,900 $ 0.30 Depreciation $ 8,300 Rent $ 2,000 Administrative expenses $ 1,400 $ 0.03 For example, electricity costs are $1,100 per month plus $0.05 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.70 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,600 Revenue $ 59,050 Expenses: Cleaning supplies 4,750 Electricity 1,495 Maintenance 2,790 Wages and salaries 7,810 Depreciation 8,300 Rent 2,200 Administrative expenses 1,555 Total expense 28,900 Net operating income $ 30,150 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.)

Explanation / Answer

Actual Revenue and spending variances Flexible budget Cars washed 8600 8600 Revenue 59050 1430 F 57620 Expenses: Cleaning supplies 4750 450 U 4300 Electricity 1495 35 F 1530 Maintenance 2790 210 U 2580 Wages and salaries 7810 330 U 7480 Depreciation 8300 0 None 8300 Rent 2200 200 U 2000 Administrative expenses 1555 103 F 1658 Total expense 28900 1052 U 27848 Net operating income 30150 378 F 29772

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