Lavage Rapide is a Canadian company that owns and operates a large automatic car

Question

Lavage Rapide is a Canadian company that owns and operates a large automatic carwash facility near Montreal. The following table provides data concerning the company’s costs:

For example, electricity costs are $1,100 per month plus $0.09 per car washed. The company expected to wash 8,100 cars in August and to collect an average of $6.10 per car washed. The company actually washed 8,200 cars.

The actual operating results for August appear below.

  

Required:

Compute 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.)

Fixed Cost
per Month Cost per
Car Washed Cleaning supplies $ 0.60 Electricity $ 1,100 $ 0.09 Maintenance $ 0.15 Wages and salaries $ 5,000 $ 0.30 Depreciation $ 8,000 Rent $ 1,900 Administrative expenses $ 1,400 $ 0.05

Explanation / Answer

Lavage Rapide Activity Variances For the Month Ended August 31 Planning budget Flexible budget Activity variances Revenue 49410 50020 610 F Expenses: Cleaning supplies 4860 4920 60 U Electricity 1829 1838 9 U Maintenance 1215 1230 15 U Wages and salaries 7430 7460 30 U Depreciation 8000 8000 0 None Rent 1900 1900 0 None Administrative expenses 1805 1810 5 U Total expense 27039 27158 119 U Net operating income 22371 22862 491 F

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