Question

The following is total monthly budgeted cost and activity information for the four activity centers in...

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

Variable

Fixed

Cost Driver
Statement inquiry

$79,900

$162,000

3,400 labor hours
Correspondence

$9,612

$21,000

2,700 letters
Account billing

$127,500

$73,000

2,550,000 lines
Payment verification

$8,800

$80,000

22,000 accounts


In September, actual total costs and activity were as follows:

Activity Center

Total Costs

Driver Amount
Statement inquiry

$238,830

3,270 labor hours
Correspondence

$31,214

2,690 letters
Account billing

$201,327

2,550,000 lines
Payment verification

$89,265

21,840 accounts


Required
Compute the flexible-budget variances for the following two activity cost items (round unit costs to two decimal places and enter favorable variances as positive numbers and unfavorable variances as negative numbers):

  Correspondence   

  Account billing   

Business   Accounting   
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Homework Answers

Answer #1
Flexible budget
Budgeted Costs
Correspondence
      $21,000 + ($9,612 / 2,700    x 2,690 )		 $30,576.40
Account Billing $73,000 + ($127,500/ 2,550,000    x   2,550,000 ) $200,500
Flexible budget variance:   = Budgeted costs (-) Actual Costs
Correspondence $30,576.40   (-) $31,214 ($637.60) Unfavourable
Account Billing $200,500 (-) $201,327 ($827 Unfavourable
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