The following is monthly budgeted cost and activity information for the four act
ID: 2465477 • Letter: T
Question
The following is monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company:
Variable
Fixed
Cost Driver
$82,110
$152,000
3,400 labor hours
$9,604
$27,000
2,800 letters
$125,000
$82,000
2,500,000 lines
$9,680
$79,000
22,000 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$237,766
3,510 labor hours
$36,608
3,000 letters
$199,908
2,340,000 lines
$89,430
22,170 accounts
Required
Compute the flexible-budget variances for the following two activity cost items (round all answers to the nearest dollar and enter favorable variances as positive numbers and unfavorable variances as negative numbers):
1. Bill verification
2. Account inquiry
Variable
Fixed
Cost Driver
Account inquiry$82,110
$152,000
3,400 labor hours
Correspondence$9,604
$27,000
2,800 letters
Account billing$125,000
$82,000
2,500,000 lines
Bill verification$9,680
$79,000
22,000 accounts
Explanation / Answer
Flexible Budget
Actual
Flexible
Variance
Account inquiry
237,666
236,767
999(U)
Correspondence
36,608
37,290
682(F)
Account billing
199,908
199,000
908(U)
Bill Verification
89,430
88,755
675(U)
total
563,712
561,812
1900(U)
Working notes:
Account inquiry 82,110/3400* 3,510 + 152,000
Correspondence 9604/2800 *3000 + 27,000
Account billing = 125,000/2,500,000 * 2,340,000 + 82,000
Bill verification = 9,680/22,000 * 22,170 + 79,000
Actual
Flexible
Variance
Account inquiry
237,666
236,767
999(U)
Correspondence
36,608
37,290
682(F)
Account billing
199,908
199,000
908(U)
Bill Verification
89,430
88,755
675(U)
total
563,712
561,812
1900(U)
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