The following is monthly budgeted cost and activity information for the four act
ID: 2468739 • 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
$76,725
$151,000
3,300 labor hours
$9,968
$29,000
2,800 letters
$127,500
$71,000
2,550,000 lines
$8,325
$76,000
18,500 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$222,939
3,100 labor hours
$38,775
2,880 letters
$206,313
2,690,000 lines
$85,079
18,430 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 inquiry ( )
Account billing ( )
Variable
Fixed
Cost Driver
Account inquiry$76,725
$151,000
3,300 labor hours
Correspondence$9,968
$29,000
2,800 letters
Account billing$127,500
$71,000
2,550,000 lines
Bill verification$8,325
$76,000
18,500 accounts
Explanation / Answer
Account inquiry =$76,725/3,300 labor hours*3,100+$151,000=$223,075-Actual $222,939=$136 Favourable
Account billing =$127,500/2,550,000 lines*2,690,000 lines+ fixed $71,000=$205,500-Actual $206,313=-$813 Unfavorable.
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