50.1K

Verified Solution

Link Copied!

Exercise 9-13 Revenue and Spending Variances [LO9-3]

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 companys costs:

	Fixed Cost per Month			Cost per Car Washed
Cleaning supplies				$	0.50
Electricity	$	1,000		$	0.09
Maintenance				$	0.25
Wages and salaries	$	4,300		$	0.20
Depreciation	$	8,500
Rent	$	1,900
Administrative expenses	$	1,600		$	0.03

For example, electricity costs are $1,000 per month plus $0.09 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.10 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		8,600
Revenue	$	53,950
Expenses:
Cleaning supplies		4,750
Electricity		1,735
Maintenance		2,365
Wages and salaries		6,360
Depreciation		8,500
Rent		2,100
Administrative expenses		1,755
Total expense		27,565
Net operating income	$	26,385

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 & Explanation Solved by verified expert

See Answer