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: Fixed Cost per Month Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expenses Cost per Car Washed $0.40 $0.09 $0.25 $0.30 $1,100 $4,300 $8,300 $2,200 $1,700 $0.03 For example, electricity costs are $1,100 per month plus $0.09 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.60 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 "Fi" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) Lavage Rapide Activity Variances K Prev 5 of 6 Next>

Explanation / Answer

Activity variance = Flxexible budget          - planned budget where   Flexible budget = fixed cost per month + 8,200*cost per car washed Planned budget = fixed cost per month +8,100*cost per cash washed fixed cost cost per 8,200 8,100 per monht car washed Flexible planned Activity variance Revenue 54120 53460 660 F Expenses Cleaning supplies 0.4 3280 3240 40 U Electricity 1,100 0.09 1838 1829 9 U Maintenance 0.25 2050 2025 25 U Wages and salaries 4,300 0.3 6760 6730 30 U Depreciation 8,300 8,300 8,300 0 N Rent 2,200 2,200 2,200 0 N Administrative expenses 1,700 1,700 1,700 0 N total expense 17600 1.04 26128 26024 104 U net operating income 27992 27436 556 F

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