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:

Fixed Cost per Month

Cost per Car Washed

Cleaning supplies				$	0.80
Electricity	$	1,400		$	0.08
Maintenance				$	0.25
Wages and salaries	$	4,800		$	0.40
Depreciation	$	8,200
Rent	$	2,100
Administrative expenses	$	1,400		$	0.02

  

For example, electricity costs are $1,400 per month plus $0.08 per car washed. The company expected to wash 8,200 cars in August and to collect an average of $6.40 per car washed.

  

The actual operating results for August appear below.

  

Lavage Rapide Income Statement For the Month Ended August 31
Actual cars washed		8,300
Revenue	$	54,580
Expenses:
Cleaning supplies		7,060
Electricity		2,026
Maintenance		2,290
Wages and salaries		8,440
Depreciation		8,200
Rent		2,300
Administrative expenses		1,464
Total expense		31,780
Net operating income	$	22,800

  

Required:

Compute the company's revenue and spending variances for August.

Answer 1

		Revenue and Spending variance
		Actual	Flexible	Revenue & spending
		Result	budget	variance
cars washed		8,300	8300
Revenue		54,580	53120	1,460	F
Expenses
Cleaning supplies		7,060	6640	420	U
Electricity		2,026	2064	38	F
Maintenance		2,290	2075	215	U
Wages and salaries		8,440	8120	320	U
Depreciation		8,200	8,200	0	N
Rent		2,300	2,100	200	U
Administrative expenses		1,464	1,566	102	F
total expense		31,780	30,765	1,015	U
net operating income		22,800	22,355	445	F