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Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...

Question

Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility...

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 $ 1,200 $ 0.07
Maintenance $ 0.15
Wages and salaries $ 4,700 $ 0.30
Depreciation $ 8,000
Rent $ 2,100
Administrative expenses $ 1,800 $ 0.03

For example, electricity costs are $1,200 per month plus $0.07 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.00 per car washed.

The actual operating results for August appear below.

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed 8,200
Revenue $ 50,700
Expenses:
Cleaning supplies 4,550
Electricity 1,737
Maintenance 1,455
Wages and salaries 7,490
Depreciation 8,000
Rent 2,300
Administrative expenses 1,943
Total expense 27,475
Net operating income $ 23,225

Required:

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

Answers

Actual Revenue and spending variances Flexible budget
Cars washed 8200 8200
Revenue 50700 1500 F 49200
Expenses:
Cleaning supplies 4550 450 U 4100
Electricity 1737 37 F 1774
Maintenance 1455 225 U 1230
Wages and salaries 7490 330 U 7160
Depreciation 8000 0 None 8000
Rent 2300 200 U 2100
Administrative expenses 1943 103 F 2046
Total expenses 27475 1065 U 26410
Net operating income 23225 435 F 22790


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