The following is monthly budgeted cost and activity information for the four act
ID: 2466274 • 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
$82,335
$167,000
3,300 labor hours
$10,295
$20,000
2,900 letters
$178,500
$78,000
2,550,000 lines
$9,120
$79,000
19,000 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$253,004
3,420 labor hours
$30,329
3,020 letters
$269,994
2,730,000 lines
$87,269
19,080 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):
Account billing:
Correspondence:
Variable
Fixed
Cost Driver
Account inquiry$82,335
$167,000
3,300 labor hours
Correspondence$10,295
$20,000
2,900 letters
Account billing$178,500
$78,000
2,550,000 lines
Bill verification$9,120
$79,000
19,000 accounts
Explanation / Answer
Answer Flexible Budget Sl no. Particular Actual Expenses Flexible budget Variance Favourable /Unfavourable 1 Account Billing 269994 269100 -894 Unfavorable 2 Correspondence 30329 30721 392 Favourable Working Notes (i) Correspondence Flexible budget cost Fixed Cost 20000 Variable cost 10721 Total Budgeted Cost 30721 (ii) Account Billing Flexible budget cost Fixed Cost 78000 Variable cost 191100 Total Budgeted Cost 269100
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