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 Cost per Car Washed per Month Cleaning supplies Electricity $0.50 $0.06 $0.15 $0.30 $1,200 Maintenance Wages and salaries Depreciation $4,200 $8,500 $2,100 $1,700 Rent Administrative expenses $0.04 For example, electricity costs are $1,200 per month plus $0.06 per car washed. The company expects to wash 8,400 cars in August and to collect an average of $6.30 per car washed. The company actually washed 8,500 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

	Flexible Budget		Actual Results	Activity Variance
Cleaning Supplies	$      4,250.00	=8500*0.5
Electricity	$      1,710.00	=1200+8500*0.06
Maintenance	$      1,275.00	=8500*0.15
Wages and salaries	$      6,750.00	=4200+8500*0.3
Depreciation	$      8,500.00	8500
Rent	$      2,100.00	2100
Administrative expenses	$      2,040.00	=1700+8500*0.04

Activity Variance = Actual Results - Flexible Budget
Positive result is unfavorable i.e. Actual greater than Budget
Negative Result is favorable i.e. Actual lower than Budget