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 $ 0.70 Electricity $ 1,100 $ 0.07 Maintenance $ 0.20 Wages and salaries $ 4,500 $ 0.30 Depreciation $ 8,400 Rent $ 1,800 Administrative expenses $ 1,400 $ 0.01 For example, electricity costs are $1,100 per month plus $0.07 per car washed. The company expects to wash 8,000 cars in August and to collect an average of $6.80 per car washed. The company actually washed 8,100 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.)

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Answer 1

Answer:

Particulars	Budgeted	Actual	Activity variance	F/U
Cars	8000	8100
Sales	$             54,400	$           55,080	$          680	F
Costs:
Cleaning supplies	$               5,600	$             5,670	$            70	U
Electricity	$               1,660	$             1,667	$               7	U
Maintenance	$               1,600	$             1,620	$            20	U
Wages and salaries	$               6,900	$             6,930	$            30	U
Depreciation	$               8,400	$             8,400	$             -	None
Rent	$               1,800	$             1,800	$             -	None
Administrative expenses	$               1,480	$             1,481	$               1	U
Total costs	$             27,440	$          27,568	$          128	U
Net Income	$             26,960	$          27,512	$          552	F

Calculations:

- А в с DE 284 Particulars Budgeted Actual Activity variance F/U 285 286 Cars 8000 8100 287 Sales =6.8*B286 =6.8*0286 =C287-B287 F 288 Costs: 289 Cleaning supplies =0.7*B286 =0.7*C286 =C289-B289 U 290 Electricity =1100+(0.07*B286) =1100+(0.07*C286) =C290-B290 291 Maintenance =0.2*3286 =0.2*C286 =C291-B291 U 292 Wages and salaries =4500+(0.3*B286) 1=4500+(0.3*C286) =C292-B292 293 Depreciation 8400 8400 =C293-B293 294 Rent 1800 1800 =C294-B294 295 Administrative expenses =1400+(0.01*B286) =1400+(0.01*C286) =C295-B295 U 296 Total costs =SUM(B289:B295) =SUM(C289:C295) =C296-B296 297 Net Income =B287-B296 =C287-C296 =C297-B297 U

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