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Exercise 9-13 Revenue and Spending Variances [LO9-3] Lavage Rapide is a Canadian company that owns and...

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Accounting

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

Lavage Rapide is a Canadian company that owns and operates alarge automatic car wash facility near Montreal. The followingtable provides data concerning the company’s 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 $0.09per car washed. The company expects to wash 8,500 cars in Augustand 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 washed8,600
Revenue$53,950
Expenses:
Cleaning supplies4,750
Electricity1,735
Maintenance2,365
Wages and salaries6,360
Depreciation8,500
Rent2,100
Administrative expenses1,755
Total expense27,565
Net operating income$26,385

Required:

Calculate the company's revenue and spending variances forAugust. (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 positivevalues.)

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Solution

Lavage Rapide
Revenues and Spending Variance
For the Month ended August 31
Revenue $ 1,490.00 F
Expenses:
Cleaning supplies $ 450.00 U
Electricity $ 39.00 F
Maintenance $ 215.00 U
Wages and salaries $ 340.00 U
Depreciation $ 0.00 None
Rent $ 200.00 U
Administrative expenses $ 103.00 F
Total Expenses $ 1,063.00 U
Net Operating Income $ 427.00 F

Working

Units (A) Fixed cost (B) Variable cost per unit © Flexible cost and revenue (D=(A x C) +B)
Revenue 8600 $                 -   $          6.10 $     52,460.00
Expenses: 8600
Cleaning supplies 8600 $          0.50 $       4,300.00
Electricity 8600 $    1,000.00 $          0.09 $       1,774.00
Maintenance 8600 $          0.25 $       2,150.00
Wages and salaries 8600 $    4,300.00 $          0.20 $       6,020.00
Depreciation 8600 $    8,500.00 $       8,500.00
Rent 8600 $    1,900.00 $       1,900.00
Administrative expenses 8600 $    1,600.00 $          0.03 $       1,858.00
Total Expenses $     26,502.00
Net Operating Income $     25,958.00

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