Homework SourseIn this problem you must create the flexible budget and flex
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.
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The following is monthly budgeted cost and activity information for the four activity centers in the billing department of Oregon Power Company:
Variable
Fixed
Cost Driver
$79,040
$161,000
3,200 labor hours
$9,716
$27,000
2,800 letters
$175,000
$82,000
2,500,000 lines
$7,770
$76,000
18,500 accounts
In September, actual costs and activity were as follows:
Total Costs
Driver Amount
$240,930
3,220 labor hours
$36,704
2,610 letters
$251,860
2,420,000 lines
$83,120
18,550 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):
1. Bill verification: ?
2. Correspondence: ?
| Activity Center | Variable | Fixed | Cost Driver |
| Account inquiry | $79,040 | $161,000 | 3,200 labor hours |
| Correspondence | $9,716 | $27,000 | 2,800 letters |
| Account billing | $175,000 | $82,000 | 2,500,000 lines |
| Bill verification | $7,770 | $76,000 | 18,500 accounts |
