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 $1,200 per month plus $0.06 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.50 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 $ 0.40 Electricity $ 1,200 $ 0.06 Maintenance $ 0.25 Wages and salaries $ 4,200 $ 0.30 Depreciation $ 8,500 Rent $ 1,800 Administrative expenses $ 1,500 $ 0.02

Explanation / Answer

Actual Flexible budget Revenue and spending variances Revenue 54750 53300 1450 F Expenses: Cleaning supplies 3740 3280 460 U Electricity 1656 1692 36 F Maintenance 2265 2050 215 U Wages and salaries 6990 6660 330 U Depreciation 8500 8500 0 None Rent 2000 1800 200 U Administrative expenses 1562 1664 102 F Total Expenses 26713 25646 1067 U Net operating income(loss) 28037 27654 383 F

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