Course Contents » The following is total monthly budgeted cost and activity info
ID: 2557149 • Letter: C
Question
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The following is total monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company:
Variable
Fixed
Cost Driver
$80,982
$157,000
3,300 labor hours
$9,504
$21,000
2,700 letters
$120,000
$88,000
2,400,000 lines
$11,180
$77,000
21,500 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$242,736
3,480 labor hours
$30,010
2,500 letters
$198,969
2,220,000 lines
$87,502
21,620 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):
Correspondence
Account inquiry
Variable
Fixed
Cost Driver
Account inquiry$80,982
$157,000
3,300 labor hours
Correspondence$9,504
$21,000
2,700 letters
Account billing$120,000
$88,000
2,400,000 lines
Bill verification$11,180
$77,000
21,500 accounts
Explanation / Answer
Answer
1.
Correspondence :
Flexible-budget variances = flexible-budget cost - actual cost
flexible-budget variances =(Fixed cost+veriable cost) - actual cost
=$21000+(3.52*2500) - $30,010
=21000+8800-30010
=210 Unfavourable
W.N. Veriable cost = 9504/2700 = $3.52
2.
Account inquiry
Flexible-budget variances = flexible-budget cost - actual cost
flexible-budget variances =(Fixed cost+veriable cost) - actual cost
=$157000+(24.54*2500) - $242736
=157000+61350-242736
=24386 Unfavourable
W.N. Veriable cost = 80982/3300 = $24.54