The following is monthly budgeted cost and activity information for the four act
ID: 2469022 • 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
$78,438
$166,000
3,400 labor hours
$10,440
$25,000
2,900 letters
$156,000
$82,000
2,600,000 lines
$10,865
$78,000
20,500 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$242,056
3,330 labor hours
$35,157
2,700 letters
$242,532
2,670,000 lines
$89,306
20,540 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 inquiry
Variable
Fixed
Cost Driver
Account inquiry$78,438
$166,000
3,400 labor hours
Correspondence$10,440
$25,000
2,900 letters
Account billing$156,000
$82,000
2,600,000 lines
Bill verification$10,865
$78,000
20,500 accounts
Explanation / Answer
Bill verification=$10,865/20,500 accounts*20,540 accounts+$78,000=$88,886.2-89,306 Actual=-$419.8 Unfavorable.
Account inquiry=$78,438/3,400 labor hours*3,330 labor hours+$166,000=$242,823.1-Actual 242,056=$767.1 Favorable
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