(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 center Cost Driver Bill Verification No of Accounts Correspondence no of Letters Particulars Budgeted Variable Cost Budgeted Fixed Cost Total Cost Cost Driver Total Numbers Cost Per Unit Bill Verification 8325 77000 85325 No of Accounts 18500 4.61 Correspondence 9585 22000 31585 no of Letters 2700 11.70 Calculation Flexible Budget for actual Units Particulars Cost Driver Actual Nos Budgeted Cost Per Unit Total Budgeted cost for actual Units Actual Cost Variance Bill Verification No of Accounts 18320 4.61 84455.2 85731 -1275.80 Unfavorable Variance Correspondence no of Letters 2780 11.7 32526 32683 -157.00 Unfavorable Variance

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