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: Fixed Cost per Month Cost per Car Wash S 0.70 $ 0.09 s 0.15 $ 0.40 ed Cleaning supplies Electricity Maintenance Wages and salaries Depreciation Rent Administrative expenses $1,300 $ 4,600 $ 8,200 $ 2,200 S 1,400 $ 0.02 For example, electricity costs are $1,300 per month plus $0.09 per car washed. The company expected to wash 8.100 cars in August and to collect an average of $6.30 per car washed. The company actually washed 3.200 cars in August Required: Compute the company's activity variances for August (Indicate the effect of each vanance by selecting "Fll for favorable, "U" for unfavorable, and "Nones for no effect (.e., zero variance). Input all amounts as positive values.)

Explanation / Answer

Since, multiple questions have been posted, the first 3 questions have been answered as the 4 question has multiple parts and is an independent question.

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Part 1)

To calculate the activity variances, we need to prepare the flexible budget and compare the same with the planning budget. The planning budget, flexible budget and activity variances are given below:

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Question 38)

The statement is "True".

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Explanation:

A cost which can be directly controlled by a manager is known as controllable cost. All the variable costs (such as direct material, direct labor and variable overheads) are considered as controllable costs. Some forms of fixed costs are also controllable. However, some of the variable and fixed costs are not controllable. These costs will have to be incurred irrespective of the level of production/output or sales. Therefore, no control can be exercised over such costs irrespective of whether they are fixed or variable.

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Question 35)

The statement is "True".

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Explanation:

Comparision of actual results versus information provided by the flexible budget is considered to be more appropriate for determining variances and performance evaluation purposes. A flexible budget can be prepared for any level of activity and uses standard rates for determining the revenue and cost figures. Therefore, it provides more realistic and relevant information when compared to the static budget which remains fixed irrespective of the level of actual production.

Lavage Rapide Activity Variances For the Month Ended August 31 Planning Budget (8,100) Flexible Budget (8,200) Activity Variances Revenue 51,030 (8,100*6.30) 51,660 (8,200*6.30) 630 F Expenses: Cleaning Supplies 5,670 (8,100*.70) 5,740 (8,200*.70) 70 U Electricity 2,029 (1,300+.09*8,100) 2,038 (1,300+.09*8,200) 9 U Maintenance 1,215 (8,100*.15) 1,230 (8,200*.15) 15 U Wages and Salaries 7,840 (4,600 + .4*8,100) 7,880 (4,600 + .4*8,100) 40 U Depreciation 8,200 (Fixed) 8,200 (Fixed) 0 Rent 2,200 (Fixed) 2,200 (Fixed) 0 Administrative Expenses 1,562 (1,400 + 8,100*.02) 1,564 (1,400 + 8,200*.02) 2 U Total Expense 28,716 28,852 136 U Net Operating Income $22,314 $22,808 $494 F

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