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 $ 0.40 Electricity $ 1,200 $ 0.08 Maintenance $ 0.10 Wages and salaries $ 4,700 $ 0.30 Depreciation $ 8,400 Rent $ 2,100 Administrative expenses $ 1,500 $ 0.01 For example, electricity costs are $1,200 per month plus $0.08 per car washed. The company expected to wash 8,000 cars in August and to collect an average of $6.00 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,100 Revenue $ 50,100 Expenses: Cleaning supplies 3,700 Electricity 1,810 Maintenance 1,040 Wages and salaries 7,460 Depreciation 8,400 Rent 2,300 Administrative expenses 1,480 Total expense 26,190 Net operating income $ 23,910 Required: 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.)

Answer 1

revenue and spending variance

Revenue (8100*6-50100)	1500 F
Expenses
Cleaning supplies (8100*.4-3700)	460 U
Electricity (8100*.08+1200-1810)	38 F
Maintenance (810-1040)	230 U
Wages and salaries (8100*.30+4700-7460)	330 U
Depreciation	0 None
Rent	200 U
Administrative expense (8100*.01+1500-1480)	101 F
Total expense	1081 U
Net operating income	419 F