In this problem, you must create the flexible budget and flexible budget varianc
ID: 2504892 • Letter: I
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:
Be sure to follow the instructions about the sign that you should enter with your numerical answer. There is no partial credit - you must get both variances correct in order to get the full 10 points.
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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
$78,812
$163,000
3,400 labor hours
$9,604
$21,000
2,800 letters
$127,500
$87,000
2,550,000 lines
$9,460
$76,000
22,000 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$243,598
3,440 labor hours
$29,955
2,620 letters
$222,130
2,700,000 lines
$86,255
22,100 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$78,812
$163,000
3,400 labor hours
Correspondence$9,604
$21,000
2,800 letters
Account billing$127,500
$87,000
2,550,000 lines
Bill verification$9,460
$76,000
22,000 accounts
Explanation / Answer
Flexible Budget
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