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				$	0.60
Electricity	$	1,100		$	0.06
Maintenance				$	0.30
Wages and salaries	$	4,500		$	0.30
Depreciation	$	8,100
Rent	$	1,800
Administrative expenses	$	1,300		$	0.04

For example, electricity costs are $1,100 per month plus $0.06 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.80 per car washed.

The actual operating results for August appear below.

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed		8,500
Revenue	$	59,220
Expenses:
Cleaning supplies		5,540
Electricity		1,574
Maintenance		2,760
Wages and salaries		7,380
Depreciation		8,100
Rent		2,000
Administrative expenses		1,536
Total expense		28,890
Net operating income	$	30,330

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

Solution: