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 $0.09 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.50 per car washed. The company actually washed 8,500 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 $ 0.70 Electricity $ 1,100 $ 0.09 Maintenance $ 0.20 Wages and salaries $ 4,800 $ 0.30 Depreciation $ 8,000 Rent $ 2,100 Administrative expenses $ 1,400 $ 0.02

Explanation / Answer

Flexible budget Planning budget Activity variances Cars washed 8500 8400 Revenue 55250 54600 650 F Expenses: Cleaning supplies 5950 5880 70 U Electricity 1865 1856 9 U Maintenance 1700 1680 20 U Wages and salaries 7350 7320 30 U Depreciation 8000 8000 0 None Rent 2100 2100 0 None Administrative expenses 1570 1568 2 U Total expenses 28535 28404 131 U Net operating income 26715 26196 519 F

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