The following is monthly budgeted cost and activity information for the four act
ID: 2466858 • 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
$80,751
$161,000
3,300 labor hours
$9,520
$21,000
2,800 letters
$144,000
$82,000
2,400,000 lines
$10,250
$77,000
20,500 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$243,127
3,390 labor hours
$31,672
2,900 letters
$236,362
2,560,000 lines
$88,110
20,640 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: _____
Correspondence: _____
Activity CenterVariable
Fixed
Cost Driver
Account inquiry$80,751
$161,000
3,300 labor hours
Correspondence$9,520
$21,000
2,800 letters
Account billing$144,000
$82,000
2,400,000 lines
Bill verification$10,250
$77,000
20,500 accounts
Explanation / Answer
Answer:
Bill verification=Standard cost-Actual cost
={[($10250/20500)*20640]+77000}-88110
=87320-88110
=790 U
Correspondence=Standard cost-Actual cost
={[($9520/2800)*2900]+21000}-31672
=30860-31672
=812 U
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