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 Account inquiry Correspondence Account billing Bill verification Variable $80,025 $9,632 $156,000 $9,620 Fixed $153,000 $26,000 $82,000 $77,000 Cost Driver 3,300 labor hours 2,800 letters 2,600,000 lines 18,500 accounts In September, actual costs and activity were as follows: Activity Center Account inquiry Correspondence Account billing Bill verification Total Costs $236,886 $35,832 $231,307 $85,861 Driver Amount 3,440 labor hours 2,850 letters 2,480,000 lines 18,570 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 billing Bill verification

Explanation / Answer

Flexible budget variance for Account Billing Cost driver Activity 2600000 lines 2480000 lines Varaible Cost            156,000                     148,800 (156000/2600000 *2480000) Fixed cost               82,000                        82,000 Total            238,000                     230,800 Actual costs                     231,307 Varaince - Unfavourable                           (507) Flexible budget variance for Bill Verification Cost driver Activity 18,500 accounts 18,570 accounts Varaible Cost                 9,620                          9,656 (9620/18500*18570) Fixed cost               77,000                        77,000 Total               86,620                        86,656 Actual costs                        85,861 Varaince - favourable                              795

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