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				$	0.50
Electricity	$	1,300		$	0.07
Maintenance				$	0.10
Wages and salaries	$	4,500		$	0.40
Depreciation	$	8,500
Rent	$	2,000
Administrative expenses	$	1,600		$	0.03

For example, electricity costs are $1,300 per month plus $0.07 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.

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed		8,600
Revenue	$	58,200
Expenses:
Cleaning supplies		4,750
Electricity		1,865
Maintenance		1,090
Wages and salaries		8,260
Depreciation		8,500
Rent		2,200
Administrative expenses		1,755
Total expense		28,420
Net operating income	$	29,780

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.)

Answer 1