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 $ 0.80 Electricity $ 1,400 $ 0.07 Maintenance $ 0.20 Wages and salaries $ 4,000 $ 0.30 Depreciation $ 8,100 Rent $ 1,900 Administrative expenses $ 1,800 $ 0.05 For example, electricity costs are $1,400 per month plus $0.07 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.80 per car washed. The company actually washed 8,600 cars in August. Required: Calculate the company's activity 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 1

Ans:

Particulars	Flexible Budget	Planning budget	Activity varience
Car washed (Revenue)	58480	57800	680	F
	(8600*6.8)	(8500*6.8)
Less:
Cleaning supplies	6880	6800	80	U
	(8600*0.8)	(8500*0.8)
Electricity	2002	1995	7	U
	(1400+(8600*0.07)	(1400+(8500*0.07)
Maintenance	1720	1700	20	U
	(8600*0.2)	(8500*0.2)
Wages and Salaries	6580	6550	30	U
	(4000+(8600*0.3)	(4000+(8500*0.3)
Depreciation	8100	8100	0	NONE
Rent	1900	1900	0	NONE
Administrative expense	2230	2225	5	U
	(1800+8600*0.05)	(1800+8500*0.05)
Total expense	29412	29270	142	U
Net operating expense	29068	28530	538	F