Lavage Rapide is a Canadian company that owns and operates a large automatic car
ID: 2711679 • Letter: L
Question
Lavage 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:
For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company expected to wash 9,000 cars in August and to collect an average of $4.90 per car washed.
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 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:
Explanation / Answer
CALCULATION OF REVENUE AND SPENDING VARIANCES FOR AUGUST
REVENUE VARIANCES
SALES VOLUME VARIANCE=(ACTUAL UNITS SOLD - EXPECTED UNITS SOLD)*BUDGETED PRICE PER UNIT
ACTUAL UNITS SOLD=$8,800
EXPECTED UNITS SOLD=$9,000
BUDGETED PRICE PER UNIT=$4.90
SALES VOLUME VARIANCE =(8,800-9,000)*$4.90
=- $ 980 U
SELLING PRICE VARIANCE=(ACTUAL SELLING PRICE-BUDGETED SELLING PRICE)*ACTUAL UNITS SOLD
ACTUAL SELLING PRICE=ACTUAL REVENUE/ACTUAL CAR WASHED=$43,080/8,800=$4.90
BUDGETED SELLING PRICE=$4.90
ACTUAL UNITS SOLD=8,800
SELLING PRICE VARIANCE =($4.90-$4.90)*8,800
=0 NONE
SALES MIX VARIANCE=(ACTUAL UNITS SOLD-BUDGETED UNITS SOLD)BUDGETED CONTRIBUTION MARGIN
ACTUAL UNITS SOLD=8,800
BUDGETED UNITS SOLD=9,000
BUDGETED CONTRIBUTION MARGIN=BUDGETED SELLING PRICE PER UNIT-BUDGETED VARIABLE COST PER UNIT=$4.90-$(0.80+0.15+0.20+0.30+0.10)
SALES MIX VARIANCE=(8,800-9,000)*$4.90-1.55
=-200*$3.35
=-$670 U
SPENDING VARIANCES
SPENDING VARIANCE=ACTUAL EXPENSE-BUDGETED EXPENSE
ACTUAL EXPENSE=$39,940
BUDGETED EXPENSE=8,800*$(0.8+0.15+0.20+0.30+0.10)+$1,200+$5,000+$6,000+$8,000+$4,000
=$37,840
SPENDING VARIANCE=$39,940-$37,840
=$2,100 U
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.