The following is monthly budgeted cost and activity information for the four act
ID: 2504861 • 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
$79,288
$160,000
3,400 labor hours
$9,716
$20,000
2,800 letters
$120,000
$75,000
2,400,000 lines
$8,610
$76,000
21,000 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$240,816
3,480 labor hours
$30,493
2,840 letters
$203,833
2,560,000 lines
$84,995
21,110 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
Bill verification
Variable
Fixed
Cost Driver
Account inquiry$79,288
$160,000
3,400 labor hours
Correspondence$9,716
$20,000
2,800 letters
Account billing$120,000
$75,000
2,400,000 lines
Bill verification$8,610
$76,000
21,000 accounts
Explanation / Answer
Account inquiry Standard rate = (79288 + 160000) / 3400 = $70.38 rate
Account inquiry Actual rate = 240816 / 3480 = $69.20 rate
Actual hours x Actual rate - Standard hours x standard rate = Total Labor Variance (TLV)
3480 x 69.20 - 3400 x 70.38 = $-1524 U
Actual hours x Actual rate - Actual hours x standard rate = Labor Price Variance (LPV)
3480 x 69.20 - 3480 x 70.38 = $4106 F
Actual hours x Standard rate -Standard hours X standard rate = Labor Quantity Variance (LQV)
3480 x 70.38 - 3400 x 70.38 = $-5634 U
Billing verification Standard rate = (8610 + 76000) / 21000 = $4.03
Billing verificatoin Actual rate = 84995 / 21110 = $4.03
Actual accounts x Actual rate - Standard accounts x standard rate = Total Variance for billing
21000 x 4.03 - 21110 x 4.03 = $443 F (rounded answer)
Actual accounts x Actual rate - Actual accounts x standard rate = Price Variance
21000 x 4.03 - 21000 x 4.03 = $0 There is no variance.
Actual accounts x Standard rate -Standard accounts X standard rate = Quantity Variance
21000 x 4.03 - 21110 x 4.03 = $443 F (rounded answer)
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