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:

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	$	1,200		$	0.07
Maintenance				$	0.25
Wages and salaries	$	4,800		$	0.20
Depreciation	$	8,100
Rent	$	1,900
Administrative expenses	$	1,600		$	0.02

For example, electricity costs are $1,200 per month plus $0.07 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.

Lavage Rapide
Income Statement
For the Month Ended August 31
Actual cars washed		8,300
Revenue	$	54,580
Expenses:
Cleaning supplies		6,240
Electricity		1,744
Maintenance		2,290
Wages and salaries		6,800
Depreciation		8,100
Rent		2,100
Administrative expenses		1,664
Total expense		28,938
Net operating income	$	25,642

Required:

Calculate the company's revenue and spending variances for August.

Lavage Rapide Revenue and Spending Variances For the Month Ended August 31
	Actual Results		Flexible Budget		Revenue and Spending Variances
Cars washed (q)		8,300		8,300
Revenue ($6.40q)	$	54,580	$	53,120	$	1,460	F
Expenses:
Cleaning supplies ($0.70q)		6,240		5,810		430	U
Electricity ($1,200 + $0.07q)		1,744		1,781		37	F
Maintenance ($0.25q)		2,290		2,075		215	U
Wages and salaries ($4,800 + $0.20q)		6,800		6,460		340	U
Depreciation ($8,100)		8,100		8,100		0	None
Rent ($1,900)		2,100		1,900		200	U
Administrative expenses($1,600 + $0.02q)		1,664		1,766		102	F
Total expense		28,938		27,892		1,046	U
Net operating income	$	25,642	$	25,228	$	414	F

thank you

Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported:

Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported:

Inspection time	0.5	days
Wait time (from order to start of production)	16.4	days
Process time	2.7	days
Move time	1.3	days
Queue time	3.9	days

Required:

1. Compute the throughput time. (Round your answer to 1 decimal place.)

2. Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your percentage answer to nearest whole percent.)

3. What percentage of the throughput time was spent in non–value-added activities? (Round your percentage answer to nearest whole percent.)

4. Compute the delivery cycle time. (Round your intermediate calculations and final answer to 1 decimal place.)

5. If by using Lean Production all queue time during production is eliminated, what will be the new MCE? (Do not round intermediate calculations. Round your percentage answer to nearest whole percent.)

Answer

1.

Throughput time	= Process time + Inspection time + Move time + Queue time
	= 2.7 days + 0.5 days + 1.3 days + 3.9 days
	= 8.4 days

2.

Only process time is value-added time; therefore the manufacturing cycle efficiency (MCE) is:

MCE =	Value-added time	=	2.7 days	= 0.32
	Throughput time		8.4 days

3.

If the MCE is 32%, then 32% of the throughput time was spent in value-added activities. Consequently, the other 68% of the throughput time was spent in non-value-added activities.

4.

Delivery cycle time	= Wait time + Throughput time
	= 16.4 days + 8.4 days
	= 24.8 days

5.

If all queue time is eliminated, then the throughput time drops to only 4.5 days (0.5 + 2.7 + 1.3). The MCE becomes:

MCE =	Value-added time	=	2.7 days	= 0.600
	Throughput time		4.5 days

Thus, the MCE increases to 60.0%. This exercise shows quite dramatically how lean production can improve the efficiency of operations and reduce throughput time.

thank you!