Reference no: EM13568109

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:

1. determine the cost function for the two items
2. plug in the appropriate activity amount and compute the budget
3. 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:

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 =