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	$	1,500		$	0.09
Maintenance				$	0.15
Wages and salaries	$	4,200		$	0.20
Depreciation	$	8,500
Rent	$	1,800
Administrative expenses	$	1,500		$	0.02

For example, electricity costs are $1,500 per month plus $0.09 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.00 per car washed. The company actually washed 8,300 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

Lavage Rapide
	Planning budget	Flexible budget	Activity variance
Revenue	49200	49800	600	F
Expenses :
Cleaning supplies	6560	6640	80	U
Electricity	2238	2247	9	U
Maintenance	1230	1245	15	U
Wages and salaries	5840	5860	20	U
Depreciation	8500	8500	0	None
Rent	1800	1800	0	None
Administrative expenses	1664	1666	2	U
Total expense	27832	27958	126	U
Net operating income	21368	21842	474	F