(In this problem, you must create the flexible budget and flexible budget varian

Question

(In this problem, you must create the flexible budget and flexible budget variances for two cost items. I suggest the following steps for each item: determine the cost function for the two items plug in the appropriate activity amount and compute the budget subtract the actual cost and compute the variance.)

The following is monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company:

In September, actual costs and activity were as follows:

QUESTION:
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):

  Bill verification =

  Correspondence =

Activity Center Account inquiry Correspondence Account billing Bill verification Variable $77,792 $9,585 $147,000 $8,325 Fixed $170,000 $22,000 $82,000 $77,000 Cost Driver 3,200 labor hours 2,700 letters 2,450,000 lines 18,500 accounts

Explanation / Answer

Activity Centre Budgeted Variable Cost Budgeted Fixed Cost Budgeted Total Cost Budgeted cost drivers Actual Total Cost Actual cost drivers Total cost variance Cost driver variance Account inquiry $77,792 $170,000 $247,792 3,200 labour hour $249,560 3,260 labour hour ($1,768) ($60) Correspondence $9,585 $22,000 $31,585 2,700 letters $32,683 2,780 letters ($1,768) ($80) Account billing $147,000 $82,000 $229,000 2,450,000 lines $229,094 2,460,000 lines ($1,768) ($10,000) Bill Verification $8,325 $77,000 $85,325 18,500 accounts $85,731 18,320 accounts ($1,768) $180

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