Question

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	$	1,400		$	0.05
Maintenance				$	0.20
Wages and salaries	$	4,600		$	0.40
Depreciation	$	8,200
Rent	$	2,100
Administrative expenses	$	1,800		$	0.04

For example, electricity costs are $1,400 per month plus $0.05 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.

Calculate the company's activity variances for August.

Answer 1

Lavage Rapide
Activity Variances
for the month of August
Revenues ((8300-8200) Car *$ 6.90) (A)	$690	F
Expenses:
Cleaning Supplies { (8300-8200)cars *$0.60)}	$ 60	U
Electricity { (8300-8200)cars *$0.05)}	$ 5	U
Maintenance { (8300-8200)cars *$0.20)}	$ 20	U
Wages and salaries { (8300-8200)cars *$0.40)}	$ 40	U
Depreciation	None
Rent	None
Administrative expenses { (8300-8200)cars *$0.04)}	$ 4	U
Total Expenses (B)	$ 129	U
Net Operating Income { C= (A - B ) } {$690 -$129}	$ 561	F