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			Cost per Car Washed
Cleaning supplies				$	0.70
Electricity	$	1,000		$	0.10
Maintenance				$	0.15
Wages and salaries	$	4,100		$	0.20
Depreciation	$	8,100
Rent	$	1,800
Administrative expenses	$	1,500		$	0.02

For example, electricity costs are $1,000 per month plus $0.10 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.90 per car washed. The company actually washed 8,300 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.)

Answer 1

Answer-

Lavage Rapide
Activity Variance
For the month ended August 31
Particulars	Planning Budget	Flexible Budget	Variances	Remark
	$	$	$
Revenue	8200 car washed*$6.90 per car washed= 56580	8300 car washed*$6.90 per car washed= 57270	690	Favorable
Less:-Expenses
Cleaning expenses	8200 car washed*$0.70 per car washed= 5740	8300 car washed*$0.70 per car washed= 5810	-70	Unfavorable
Electricity	(8200 car washed*$0.10 per car washed)+$1000= 1820	(8300 car washed*$0.10 per car washed)+$1000= 1830	-10	Unfavorable
Maintenance	8200 car washed*$0.15 per car washed= 1230	8300 car washed*$0.15 per car washed= 1245	-15	Unfavorable
Wages & salaries	(8200 car washed*$0.20 per car washed)+$4100= 5740	(8300 car washed*$0.20 per car washed)+$4100= 5760	-20	Unfavorable
Depreciation	8100	8100	0	None
Rent	1800	1800	0	None
Administrative expenses	(8200 car washed*$0.02 per car washed)+$1500= 1664	(8300 car washed*$0.02 per car washed)+$1500= 1666	-2	Unfavorable
Total Expenses	26094	26211	-117	Unfavorable
Income from opreations	30486	31059	573	Favorable