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	Variable	Fixed	Cost Driver
Statement inquiry	$77,385	$150,000	3,300 labor hours
Correspondence	$9,585	$26,000	2,700 letters
Account billing	$171,500	$79,000	2,450,000 lines
Payment verification	$12,980	$78,000	22,000 accounts

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

Activity Center	Total Costs	Driver Amount
Statement inquiry	$225,403	3,220 labor hours
Correspondence	$35,231	2,650 letters
Account billing	$241,504	2,330,000 lines
Payment verification	$90,939	22,050 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   

  Statement inquiry   

Answer 1

First let us calculate the Flexible Budget Amounts

Activity Center	Cost Driver	Variable	Fixed	Flexible Cost driver	Flexible	Total
	A	B	C	D	B / A X D	C + Flexible
Statement inquiry	3,300 labor hours	$   77,385	$ 150,000	3,220 labor hours	$       75,509	$ 225,509
Correspondence	2,700 letters	$      9,585	$   26,000	2,650 letters	$         9,408	$    35,408
Account billing	2,450,000 lines	$ 171,500	$   79,000	2,330,000 lines	$     163,100	$ 242,100
Payment verification	22,000 accounts	$   12,980	$   78,000	22,050 accounts	$       13,010	$    91,010

Activity Center	Flexible	Actual	Variance
Statement inquiry	$        225,509.00	$ 225,403.00	$ -106.00	Unfavorable
Correspondence	$          35,407.50	$   35,231.00	$ -176.50	Unfavorable