Question

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near Montreal. The following table provides estimates concerning the company’s costs:

	Fixed Cost per Month			Cost per Car Washed
Cleaning supplies				$	0.70
Electricity	$	1,100		$	0.07
Maintenance				$	0.15
Wages and salaries	$	4,600		$	0.20
Depreciation	$	8,400
Rent	$	2,000
Administrative expenses	$	1,700		$	0.04

For example, electricity costs should be $1,100 per month plus $0.07 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.20 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		8,300
Revenue	$	52,940
Expenses:
Cleaning supplies		6,240
Electricity		1,644
Maintenance		1,470
Wages and salaries		6,600
Depreciation		8,400
Rent		2,200
Administrative expenses		1,928
Total expense		28,482
Net operating income	$	24,458

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