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:
- determine the cost function for the two items
- plug in the appropriate activity amount and compute the budget
- subtract the actual cost and compute the variance.
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.
______________________________________________________
The following is 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
|
| 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
|
In September, actual costs and activity were as follows:
| Activity Center |
Total Costs
|
Driver Amount
|
| Account inquiry |
$240,816
|
3,480 labor hours
|
| Correspondence |
$30,493
|
2,840 letters
|
| Account billing |
$203,833
|
2,560,000 lines
|
| Bill verification |
$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 =