Question

In: Accounting

4 Lavage Rapide is a Canadian company that owns and operates a large automatic car wash...

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.)

Solutions

Expert Solution

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

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