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				$	0.50
Electricity	$	1,200		$	0.09
Maintenance				$	0.20
Wages and salaries	$	5,000		$	0.40
Depreciation	$	8,400
Rent	$	2,100
Administrative expenses	$	1,500		$	0.04

For example, electricity costs are $1,200 per month plus $0.09 per car washed. The company expects to wash 8,000 cars in August and to collect an average of $6.70 per car washed. The company actually washed 8,100 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

	Flexible budget	Activity variances		Planning budget
Cars washed	8100			8000
Revenue	54270	670	F	53600
Expenses:
Cleaning supplies	4050	50	U	4000
Electricity	1929	9	U	1920
Maintenance	1620	20	U	1600
Wages and salaries	8240	40	U	8200
Depreciation	8400	0	None	8400
Rent	2100	0	None	2100
Administrative expenses	1824	4	U	1820
Total expenses	28163	123	U	28040
Net operating income	26107	547	F	25560