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 $ 1,300 $ 0.09 Maintenance $ 0.10 Wages and salaries $ 4,400 $ 0.40 Depreciation $ 8,500 Rent $ 1,900 Administrative expenses $ 1,600 $ 0.03 For example, electricity costs are $1,300 per month plus $0.09 per car washed. The company expected to wash 8,100 cars in August and to collect an average of $6.80 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,200 Revenue $ 57,180 Expenses: Cleaning supplies 6,980 Electricity 1,999 Maintenance 1,050 Wages and salaries 8,000 Depreciation 8,500 Rent 2,100 Administrative expenses 1,743 Total expense 30,372 Net operating income $ 26,808.

1.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

	Actual	Revenue and spending variances		Flexible budget
Cars washed	8200			8200
Revenue	57180	1420	F	55760
Expenses:
Cleaning supplies	6980	420	U	6560
Electricity	1999	39	F	2038
Maintenance	1050	230	U	820
Wages and salaries	8000	320	U	7680
Depreciation	8500	0	None	8500
Rent	2100	200	U	1900
Administrative expenses	1743	103	F	1846
Total expenses	30372	1028	U	29344
Net operating income	26808	392	F	26416