For this situation, you must create the flexible budget and flexible budget vari
ID: 2762158 • Letter: F
Question
For this situation, 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.
Be sure to follow the instructions about the sign that you should enter with your numerical answer. There is no partial credit - you must get both variances correct in order to get the full 10 points.
______________________________________________________
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
$74,336
$156,000
3,200 labor hours
$9,940
$26,000
2,800 letters
$144,000
$73,000
2,400,000 lines
$9,555
$78,000
19,500 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$225,727
3,010 labor hours
$36,945
2,980 letters
$206,054
2,230,000 lines
$87,065
19,700 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):
Bill verification ________
Account billing _________
Activity CenterVariable
Fixed
Cost Driver
Account inquiry$74,336
$156,000
3,200 labor hours
Correspondence$9,940
$26,000
2,800 letters
Account billing$144,000
$73,000
2,400,000 lines
Bill verification$9,555
$78,000
19,500 accounts
Explanation / Answer
In Bill verfication for 19500 account variable cost budgeted was 9555
Thus for actual 19700 accounts variable cost would be $9653
Total budgetd cost =$9653+78000= $87653
Actual cost= $87065
Flexibudget variance= $87653-$87065= $588
Account billing for 2400000 line variable cost is $144000
so for actual 2230000 lines variable cost would be $133800
Total budgeted cost =133800+73000 = $206800
Actual Cost= $206054
Flexible budget variance= 206800-206054= $746
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