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 $1,000 per month plus $0.09 per car washed. The company expects to wash 8,200 cars in August and to collect an average of $6.40 per car washed.

The actual operating results for August appear below.

Required:

Prepare a flexible budget performance report that shows the company’s revenue and spending variances and 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.)

FIN 3113 Food Truck Project Cash Flow Mini Case

Recently, Austin Hansen was laid off from his job of 25 years. He and his wife, Anne, decided

to purchase and operate a food truck, serving burgers, fries, and soft drinks near OSU campus.

They decided the call their food truck, Hungry Hansen Hamburgers!

The Hansens were able to find a truck that costs $60,000. However, the truck will require an

additional $20,000 for the wrap and equipment. The truck has an expected life of six years and

will be depreciated using a five-year MACRS life. The expected salvage value for the truck at

the end of its useful life is $20,000. Additionally, the Hansens will need to make an initial

investment of $2,000 for product inventory (e.g., meat, hamburger buns, etc.), which will be

recovered at the end of the life of the project.

During the first year of operation, revenues are expected to be $60,000, increasing to $120,000

per year for years 2-6. Permits and licenses are expected to be $500 per year. Fuel and power

are expected to be $300 per month and the cost of materials is expected to be 40% of revenue.

The tax rate is 25% and the cost of capital (discount rate) is 15%.

Calculate the project’s annual free cash flows over the expected life of the equipment.

Exercise 9-13 Revenue and Spending Variances [LO9-3]

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 $1,000 per month plus $0.09 per car washed. The company expects to wash 8,500 cars in August and to collect an average of $6.10 per car washed.

The actual operating results for August are as follows:

Required:

Calculate the company's revenue and spending 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.)

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 $ 0.50 Electricity $ 1,300 $ 0.05 Maintenance $ 0.10 Wages and salaries $ 4,400 $ 0.20 Depreciation $ 8,000 Rent $ 2,000 Administrative expenses $ 1,500 $ 0.05 For example, electricity costs are $1,300 per month plus $0.05 per car washed. The company expects to wash 8,100 cars in August and to collect an average of $6.30 per car washed. The actual operating results for August appear below.

Lavage Rapide Income Statement For the Month Ended August 31 Actual cars washed 8,200 Revenue $ 53,130 Expenses: Cleaning supplies 4,550 Electricity 1,675 Maintenance 1,050 Wages and salaries 6,380 Depreciation 8,000 Rent 2,200 Administrative expenses 1,805 Total expense 25,660 Net operating income $ 27,470 Required: Prepare a flexible budget performance report that shows the company’s revenue and spending variances and 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.)

McEwan Industries sells on terms of 3/10, net 20. Total sales for the year are $1,381,000; 40% of the customers pay on the 10th day and take discounts, while the other 60% pay, on average, 66 days after their purchases. Assume 365 days in year for your calculations. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Open spreadsheet

1. What is the days sales outstanding? Round your answer to two decimal places.

   days

2. What is the average amount of receivables? Round your answer to the nearest cent. Do not round intermediate calculations.

   $  

3. What is the percentage cost of trade credit to customers who take the discount? Round your answers to two decimal places.

   %

4. What is the percentage cost of trade credit to customers who do not take the discount and pay in 66 days? Round your answers to two decimal places. Do not round intermediate calculations.

   Nominal cost:  %

   Effective cost:  %

5. What would happen to McEwan’s accounts receivable if it toughened up on its collection policy with the result that all nondiscount customers paid on the 20th day? Round your answers to two decimal places. Do not round intermediate calculations.

   DSO =  days

   Average receivables = $  

2. Scaling Up/KLEM

Consider the following cost structure to make umbrellas:

Capital                      10% (e.g., $1 per umbrella)
Labor                         20% (e.g,, $2 per umbrella)
Energy                      30% (e.g., $3 per umbrella)
Materials                 40% (e.g., $4 per umbrella)

1. (1 point) The production operation creates a second shift using the same plant. Labor, energy, and materials are all variable costs which go into an umbrella, whereas capital is a fixed cost (for the building, etc.) If the new operation has the same productivity as the old operation in terms of umbrellas per employee per shift, what is the new breakdown of cost percentages?

1. (1 point) If the new operation achieves double the labor productivity as the old operation (that is, not only are twice as many umbrellas made per day, twice as many are made per shift), what is the new cost breakdown?
2. (2 points) OK, so now we’re running two shifts. If half the energy required to make an umbrella is a direct marginal cost (for example, heating up the aluminum to make the interior struts) and half of it is a cost of operating the business (e.g., heating up the plant so the workers don’t freeze solid in the winter), how would moving to two shifts affect the cost structure? Hint: Start with your answer to (a) and think on a per-umbrella basis.
3. (2 points) These umbrellas don’t need to be made 100% by hand, however, and the company is considering an investment in automation so that many parts can be made by machine, with the final product simply assembled by hand (like Dell does). Starting off with the original 10/20/30/40 cost structure, if automation increases capital costs by one-quarter (that is, to 125% of their previous level) but reduces labor costs by half (that is, 50% of their previous level), how much will moving to automation reduce total cost on a percentage basis? (You may find Sutton’s Law to be useful here.)
4. (1 point) In a general sense, will investing in automation be more valuable to a factory that runs two shifts per day or one that runs only one shift? Why? (No calculation is required.)
5. (3 points) The new operation now both runs two shifts per day and automates the production. Including all the changes in capital, labor, and energy costs, how does the new total cost compare to original total cost? (You will find computing the new breakdown to be useful, but your answer should be in terms of percentage of original cost.)

An investor is reviewing two proposals, assuming similar risk profiles and a 14% required return, which one should the investor buy? Why?

Lee Vista:

Purchase Price: $464,000

Cash flows from operations:

Year 1 $48,000

Year 2 $49,440

Year 3 $50,923

Year 4 $52,451

Year 5 $54,025

Cash flow from sale on year 5 $560,000

Colony Park:

Purchase Price: $500,000

Cash flows from operations:

Year 1 $56,000

Year 2 $57,400

Year 3 $58,835

Year 4 $60,306

Year 5 $61,814

Cash flow from sale on year 5 $597,000

Where are the deer? Random samples of square-kilometer plots were taken in different ecological locations of a national park. The deer counts per square kilometer were recorded and are shown in the following table.

A)  Find SS_TOT, SS_BET, and SS_W and check that SS_TOT = SS_BET + SS_W. (Use 3 decimal places.)

B) Find d.f._BET, d.f._W, MS_BET, and MS_W. (Use 4 decimal places for MS_BET, and MS_W.)

C) Find the value of the sample F statistic. (Use 2 decimal places.)

Margot is walking in a straight line from a point 40 feet due east of a statue in a park toward a point 34 feet due north of the statue. She walks at a constant speed of 4 feet per second.

(a) Write parametric equations for Margot's position t seconds after she starts walking. (Round your coefficients to four decimal places as needed.)

(b) Write an expression for the distance from Margot's position to the statue at time t. (Round your coefficients to four decimal places as needed.)

(c) Find the times when Margot is 36 feet from the statue. (Round your answers to two decimal places)