Exercise 9-13 Revenue and Spending Variances [LO9-3] Lavage Rapide is a Canadian

Question

Exercise 9-13 Revenue and Spending Variances [LO9-3] Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides data concerning the company's costs Cost per Car Washed $0.40 $0.06 $0.20 $0.30 Fixed Cost per Nonth cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expenses $1,000 $4,500 $8,200 $2,100 $1,500 0.04 For example, electricity costs are $1,000 per month plus $0.06 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.60 per car washed. The actual operating results for August appear below

Explanation / Answer

Ans. Lavage Rapide Revenue and Speding Variances For the Month Ended August31 Particulars Variance Fav/unfav Revenue 1440 F Expense: Cleaning supplies 460 U Electricity 36 F Maintenance 220 U Wages and salaries 330 U Depreciation 0 NO EFFECT Rent 200 U Administration expenses 104 F Total expenses 1070 U Net operating income 370 F *Calculation of variance: Flexible budget Actual results Variance Revenue 56760 58200 -1440 F Expense: 0 Cleaning supplies 3440 3900 -460 U Electricity 1516 1480 36 F Maintenance 1720 1940 -220 U Wages and salaries 7080 7410 -330 U Depreciation 8200 8200 0 N Rent 2100 2300 -200 U Administration expenses 1844 1740 104 F Total expenses 25900 26970 -1070 U Net operating income 30860 31230 -370 F *Calculation of flexible budget Flexible budget Revenue (8600 * 6.6) Expense: Cleaning supplies (8600*0.40) Electricity [1000 + (0.06*8600)] Maintenance (0.20*8600) Wages and salaries [4500 + (0.30*8600)] Depreciation Rent 8200 Rent 2100 Administration expenses [1500 + (0.04*8600) *Spending Variance =   Flexible budget - Actual results *Increase in sales and income = Favourable *Decrease in sales and income = Unfavourable *Increase in Cost = Unfavourable *Decrease in Costs = Favourable

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