Exercise 9-12 Activity Variances [LO9-2] Lavage Rapide is a Canadian company tha

Question

Exercise 9-12 Activity Variances [LO9-2]

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:

For example, electricity costs are $1,100 per month plus $0.07 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.30 per car washed. The company actually washed 8,200 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.)

Fixed Cost
per Month Cost per
Car Washed Cleaning supplies $ 0.40 Electricity $ 1,100 $ 0.07 Maintenance $ 0.30 Wages and salaries $ 4,500 $ 0.20 Depreciation $ 8,200 Rent $ 1,900 Administrative expenses $ 1,800 $ 0.02

Explanation / Answer

Calculate the company's activity variances for August.

Revenue 630 F Expense Cleaning supplies 40 U Electricity 7 U Maintenance 30 U Wages and salaries 20 U Depreciation None Rent None Administrative expenses 2 U Total expense 99 U Net operating income 531 F

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