The following is total monthly budgeted cost and activity Information for the fo

Question

The following is total monthly budgeted cost and activity Information for the four activity centers in the billing department of Oregon Power Company Activity Center Varlable 78,936 $10,063 150,000 $10,455 Fixed $151,000 $20,000 86,000 $80,000 Cost Driver 3,300 labor hours 2,900 letters 2,500,000 lines 20,500 accounts Account inquiry Account billing Bil verification in September, actual costs and activity were as Activity Center Account inquiry Correspondence Account bilting Total Costs 225,259 30,594 $237,900 Driver Amount 3,110 labor hours 2,910 letters 2,530,000 lines Required Compute the Rexibie-budget variances for the following two activity regative numbers) cost items (round all answers to the nearest dollar and enter favorable variances as positive numbers and unfavorable variances as Arwer Tries 0/10

Explanation / Answer

Solution

Bills verification flexible budget variance:

Budgeted variable cost per accounts for bill verification = $10,455 / 20500 = $0.51 per account

Budgeted cost of Bill verification at actual activity level = 20630*$0.51 + $80,000 = $90,521

Actual cost of bill verification = $90,856

Flexible budget variance for bills verification = Budgeted cost - Actual cost = $90,521 - $90,856 = -$335

Correspondance flexible budget variance:

Budgeted variable cost per letter for Correspondance = $10,063 / 2900 = $3.47 per letter

Budgeted cost of Correspondance at actual activity level = 2910*$3.47 + $20,000 = $30,098

Actual cost of Correspondance = $30,594

Flexible budget variance for Correspondance = Budgeted cost - Actual cost = $30,098 - $30,594 = -$496

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