The total traceable costs of the account billing activity centre is $245,000. Cost behaviour analysis indicates that fixed costs are $75,000. Activity analysis indicates that the cost driver for account billing activity is the number of lines printed, and the total lines printed is 2,500,000.
-Flexible-budget variances are designed to measure
A) effectiveness of operations at projected level of activity.
B) effectiveness of operations at actual level of activity.
C) efficiency of operations at projected level of activity.
D) efficiency of operations at actual level of activity.

Question

Quizplus · Accepted Answer

Flexible-budget variances are designed to measure the efficiency of operations at the actual level of activity. In this case, the cost driver for account billing activity is the number of lines printed, and the actual level of activity is 2,500,000 lines printed. The flexible-budget variance will help to identify any differences between the actual cost incurred and the expected cost at this level of activity, allowing for a more accurate assessment of the efficiency of the account billing activity centre.

The Total Traceable Costs of the Account Billing Activity Centre