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

For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company expects to wash 9,000 cars in August and to collect an average of $4.90 per car washed.

The actual operating results for August appear below.

Required:

Calculate 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.)

Fixed Cost
per Month Cost per
Car Washed Cleaning supplies $ 0.80 Electricity $ 1,200 $ 0.15 Maintenance $ 0.20 Wages and salaries $ 5,000 $ 0.30 Depreciation $ 6,000 Rent $ 8,000 Administrative expenses $ 4,000 $ 0.10

Explanation / Answer

Particulars Cost formula Actual Revenue and spending variance Flexible budget Car washed 8800 8800 Revenue 4.90q 43080 40 U 43120 Expenses Cleaning supplies .80 q 7560 520 U 7040 Electricity cost 1200+.15q 2670 150 U 2520 Maintenance .20q 2260 500 U 1760 Wages and salaries 5000+.30q 8500 100 U 7640 Depreciation 6000 6000 6000 Rent 8000 8000 8000 Administrative expense 4000+.10q 4950 70 U 4880 Total expense 39940 2100 U 37840 Net operating income 3140 2140 U 5280

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