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 MonthCost per
Car Washed

Cleaning supplies   $0.50

Electricity$1,400 $0.09

Maintenance   $0.25

Wages and salaries$4,200 $0.30

Depreciation$8,300    

Rent$2,100    

Administrative expenses$1,400 $0.03

For example, electricity costs are $1,400 per month plus $0.09 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.40 per car washed.

The actual operating results for August are as follows:

Lavage Rapide

Income Statement

For the Month Ended August 31

Actual cars washed 8,200

   

Revenue$53,940

Expenses:

Cleaning supplies 4,550

Electricity 2,099

Maintenance 2,265

Wages and salaries 6,990

Depreciation 8,300

Rent 2,300

Administrative expenses 1,543

Total expense 28,047

Net operating income$25,893

Required:

Calculate the company's revenue and spending variances for August.

Answer 1

		Revenue and Spending variance
		Actual	Flexible	Revenue & spending
		Result	budget	variance
cars washed		8,200	8200
Revenue		53,940	52480	1,460	F
Expenses
Cleaning supplies		4,550	4100	450	U
Electricity		2,099	2138	39	F
Maintenance		2,265	2050	215	U
Wages and salaries		6,990	6660	330	U
Depreciation		8,300	8,300	0	N
Rent		2,300	2,100	200	U
Administrative expenses		1,543	1,646	103	F
total expense		28,047	26,994	1,053	U
net operating income		25,893	25,486	407	F