Question

EXERCISE 9–12 Activity Variances LO9–2 Refer to the data for Lavage Rapide in Exercise 9–10. The company actually washed 8,800 cars in August.

Required: Calculate the company’s activity variances for August. (Hint: Refer to Exhibit 9–6.)

Exhibit 9-10:

	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 are $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.

Exhibit: 9-6

The Terminator Inc. Variance Report For the Month Ended April 30
		Actual Results		Planning Budget		Variances
Jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		105		100
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		$20,520		$19,500		$ 1,020	F
Expenses:
Mobile team operating costs . . . . . . . . . . . . . . .		10,320		10,000		320	U
Exterminating supplies . . . . . . . . . . . . . . . . . . . .		960		1,800		840	F
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		800		800		0
Dispatching costs . . . . . . . . . . . . . . . . . . . . . . . . .		2,340		2,200		140	U
Office rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1,800		1,800		0
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		2,100		2,100		0
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		18,320		18,700		380	F
Net operating income . . . . . . . . . . . . . . . . . . . . . . .		$ 2,200		$ 800		$ 1,400	F

Answer 1