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 carwash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,300 per month plus $0.06 per car washed. The company actually washed 8,400 cars in August. The company expected to collect an average of $6.80 per car washed.

Prepare a report showing 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

The revenue and spending variances for the month of August for Lavage Rapide is calculated as under: Revenue variance is the difference between the budgeted revenue and the actual revenue. The budgeted revenue is $6.8 per car washed and the actual revenue collected was $57,085. Budgeted revenue for actual number of cars washed(8,400×$6.80)=$57,120. Acual revenue collected = $57,085 The budgeted revenue is more than actual revenue therefore the revenue variance would be unfavorable (U). Revenue variance=(Budeted revenue-Actual revenue) Revenue Variance=($57,120-$57,085) =$35(U) Spending variance is the difference between budgeted expenses and the actual expense incurred. Calculation of spending variance for all the expenses individually is as under: Budgeted Expenses Budgeted Expenses Actual Expenses Spending variance (A-B) Cleaning supplies (8,400×$0.60)=$5,040 $5,040 $5,450 ($410) U Electricity [(8,400×$0.06)+$1,300]= $1804 $1,804 $1,934 ($130) U Maintenance (8,400×$0.20)=$1,680 $1,680 $2,250 ($570) U Wages and salaries [(8,400×$0.30)+$4,500]= $7,020 $7,020 $7,900 ($880) U Depreciation $8,300 $8,300 $0 Rent $2,000 $2,000 $0 Administrative expenses [(8,400×$0.04)+$1,300]= $1,636 $1,636 $1,696 ($60) U Total spending variance $27,480 $29,530 ($2,050) U

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