Question

1. 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	$	1,100		$	0.06
Maintenance				$	0.25
Wages and salaries	$	4,300		$	0.20
Depreciation	$	8,400
Rent	$	2,000
Administrative expenses	$	1,400		$	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 $6.70 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		8,500
Revenue	$	58,380
Expenses:
Cleaning supplies		7,220
Electricity		1,574
Maintenance		2,340
Wages and salaries		6,340
Depreciation		8,400
Rent		2,200
Administrative expenses		1,636
Total expense		29,710
Net operating income	$	28,670

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. Do not round intermediate calculations.)

Lavage Rapide
Revenue and Spending Variances
For the Month Ended August 31
Revenue		F
Expenses:
Cleaning supplies		U
Electricity		F
Maintenance		U
Wages and salaries		U
Depreciation		None
Rent		U
Administrative expenses		F
Total expense		U
Net operating income		F

Answer 1

Lavage Rapide
Revenue and spending Variances
For the month ended August 31
Particulars	Actual results	Flexible Budget	Revenue and spending variances
Car Washed	8500	8500
Revenue	$58,380.00	$56,950.00	$1,430.00	F
Expenses:
Cleaning Supplies	$7,220.00	$6,800.00	$420.00	U
Electricity	$1,574.00	$1,610.00	$36.00	F
Maintenance	$2,340.00	$2,125.00	$215.00	U
Wages and Salaries	$6,340.00	$6,000.00	$340.00	U
Depreciation	$8,400.00	$8,400.00	$0.00	None
Rent	$2,200.00	$2,000.00	$200.00	U
Administrative expenses	$1,636.00	$1,740.00	$104.00	F
Total Expenses	$29,710.00	$28,675.00	$1,035.00	U
Net Operating Income	$28,670.00	$28,275.00	$395.00	F