$ 0.70 Electricity $ 1,400 $ 0.09 Maintenance $ 0.30 Wages and salaries $ 4,400 $ 0.30 Depreciation $ 8,300
$ 0.70 Electricity $ 1,400 $ 0.09 Maintenance $ 0.30 Wages and salaries $ 4,400 $ 0.30 Depreciation $ 8,300
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
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 | $ | 0.70 | ||||
| Electricity | $ | 1,400 | $ | 0.09 | ||
| Maintenance | $ | 0.30 | ||||
| Wages and salaries | $ | 4,400 | $ | 0.30 | ||
| $ | 8,300 | |||||
| Rent | $ | 1,900 | ||||
| Administrative expenses | $ | 1,700 | $ | 0.03 | ||
For example, electricity costs are $1,400 per month plus $0.09 per car washed. The company expects to wash 8,300 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 | 8,400 | |
| Revenue | $ | 53,560 |
| Expenses: | ||
| Cleaning supplies | 6,310 | |
| Electricity | 2,117 | |
| Maintenance | 2,730 | |
| Wages and salaries | 7,250 | |
| Depreciation | 8,300 | |
| Rent | 2,100 | |
| Administrative expenses | 1,849 | |
| Total expense | 30,656 | |
| Net operating income | $ | 22,904 |
Required:
Calculate the company's revenue and spending variances for August. (
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