In: Accounting
4
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 | $ | 0.60 | |||
Electricity | $ | 1,000 | $ | 0.10 | |
Maintenance | $ | 0.25 | |||
Wages and salaries | $ | 4,600 | $ | 0.20 | |
Depreciation | $ | 8,100 | |||
Rent | $ | 2,200 | |||
Administrative expenses | $ | 1,800 | $ | 0.02 | |
For example, electricity costs are $1,000 per month plus $0.10 per car washed. The company expects to wash 8,300 cars in August and to collect an average of $6.50 per car washed.
Required:
Prepare the company’s planning budget for August.
5
Via Gelato is a popular neighborhood gelato shop. The company has provided the following cost formulas and actual results for the month of June:
Fixed Element per Month |
Variable Element per Liter |
Actual Total for June |
|||||||
Revenue | $ | 21.00 | $ | 133,540 | |||||
Raw materials | $ | 5.55 | $ | 37,130 | |||||
Wages | $ | 6,500 | $ | 2.30 | $ | 21,300 | |||
Utilities | $ | 2,530 | $ | 1.10 | $ | 10,000 | |||
Rent | $ | 3,500 | $ | 3,500 | |||||
Insurance | $ | 2,250 | $ | 2,250 | |||||
Miscellaneous | $ | 740 | $ | 1.25 | $ | 8,790 | |||
While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For example, wages should be $6,500 plus $2.30 per liter of gelato sold and the actual wages for June were $21,300. Via Gelato expected to sell 6,400 liters in June, but actually sold 6,600 liters.
Required:
Calculate Via Gelato revenue and spending variances for June. (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.)
4 | ||||
Planning budget | ||||
Cars washed | 8300 | |||
Revenue | 53950 | =8300*6.5 | ||
Expenses: | ||||
Cleaning supplies | 4980 | =8300*0.6 | ||
Electricity | 1830 | =1000+(8300*0.1) | ||
Maintenance | 2075 | =8300*0.25 | ||
Wages and salaries | 6260 | =4600+(8300*0.2) | ||
Depreciation | 8100 | |||
Rent | 2200 | |||
Administrative expenses | 1966 | =1800+(8300*0.02) | ||
Total expenses | 27411 | |||
Net operating income | 26539 | |||
5 | ||||
Actual results | Flexible budget | Revenue and spending variances | ||
Revenue | 133540 | 138600 | 5060 | U |
Expenses | ||||
Raw materials | 37130 | 36630 | 500 | U |
Wages | 21300 | 21680 | 380 | F |
Utilities | 10000 | 9790 | 210 | U |
Rent | 3500 | 3500 | 0 | None |
Insurance | 2250 | 2250 | 0 | None |
Miscellaneous | 8790 | 8990 | 200 | F |
Total expenses | 82970 | 82840 | 130 | U |
Net operating income | 50570 | 55760 | 5190 | U |