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 $1,300 per month plus $0.08 per car washed. The company expected 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.

  

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.)

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 $1,300 per month plus $0.08 per car washed. The company expected 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:

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.)

Cost per Car Washed $0.40 $0.08 $ 0.15 $ 0.20 Fixed Cost per Month Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expenses $1,300 4,600 $ 8,400 $ 2,100 $ 1,400 $0.03

Explanation / Answer

Solution:

Lavage Rapide Activity Variances For the month ended August 31 Particulars Actual activity - 8200 car wash Expected activity - 8100 car wash Activity Variance Favorable / Unfavorable / No Effect Revenue $51,660.00 $51,030.00 $630.00 F Expenses: Cleaning Supplies $3,280.00 $3,240.00 $40.00 U Electricity $1,956.00 $1,948.00 $8.00 U Maintenance $1,230.00 $1,215.00 $15.00 U Wages and Salaries $6,240.00 $6,220.00 $20.00 U Depreciation $8,400.00 $8,400.00 $0.00 None Rent $2,100.00 $2,100.00 $0.00 None Administrative Expenses $1,646.00 $1,643.00 $3.00 U Total Expenses $24,852.00 $24,766.00 $86.00 U Net Operating Income $26,808.00 $26,264.00 $544.00 F

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