Lavage Rapide is a Canadian company that owns and operates a large automatic car
ID: 2560100 • Letter: L
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: Fixed Cost per Month Cost per Car Washed Cleaning supplies $ 0.80 Electricity $ 1,200 $ 0.05 Maintenance $ 0.25 Wages and salaries $ 4,700 $ 0.40 Depreciation $ 8,300 Rent $ 2,000 Administrative expenses $ 1,600 $ 0.05 For example, electricity costs are $1,200 per month plus $0.05 per car washed. The company expects to wash 8,300 cars in August and to collect an average of $5.90 per car washed. The actual operating results for August appear below. Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,400 Revenue $ 51,070 Expenses: Cleaning supplies 7,140 Electricity 1,585 Maintenance 2,315 Wages and salaries 8,380 Depreciation 8,300 Rent 2,200 Administrative expenses 1,915 Total expense 31,835 Net operating income $ 19,235 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.)
Explanation / Answer
Lavage Rapide Paticulars Budgeted Actual Variance F/U Revenue Variance Formula Value Cars-Units 8,300 8,400 100 F Sales Volume Variance (Actual Units-Budgeted Units)*Budgted Price 590 Rate 5.90 6.08 Selling Price Variance (Actual Unit Price-Budgeted Unit Price)*Actual Units 1,510 Revenue 48,970 51,070 2,100 F Total Variance 2,100 Spending Variance Formula Value Cleaning Supplies 6640 7140 -500 U All Are based on common formula: (Standard Cost- Actual Cost) Electricity 1615 1585 30 F Maintainance 2075 2315 -240 U Wages & Salaries 8020 8380 -360 U Depreciation 8300 8300 0 - Rent 2000 2200 -200 U Administrative Ex 2015 1915 100 F Total Expenses 30665 31835 -1170 U Net Operating Income 18,305 19,235 930 F
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