Exercise 9-12 (Static) 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 estimates concerning the companys costs:

	Fixed Cost per Month			Cost per Car Washed
Cleaning supplies				$	0.80
Electricity	$	1,200		$	0.15
Maintenance				$	0.20
Wages and salaries	$	5,000		$	0.30
Depreciation	$	6,000
Rent	$	8,000
Administrative expenses	$	4,000		$	0.10

For example, electricity costs should be $1,200 per month plus $0.15 per car washed. The company expects to wash 9,000 cars in August and to collect an average of $4.90 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		8,800
Revenue	$	43,080
Expenses:
Cleaning supplies		7,560
Electricity		2,670
Maintenance		2,260
Wages and salaries		8,500
Depreciation		6,000
Rent		8,000
Administrative expenses		4,950
Total expense		39,940
Net operating income	$	3,140

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.)

Lavage Rapide

Revenue and Spending Variances

For the Month Ended August 31

Revenue

Expenses:

Cleaning supplies

Electricity

Maintenance

Wages and salaries

Depreciation

Rent

Administrative expenses

Total expense

Net operating income