Cost behaviour analysis for the four activity centres in the Billing Department of Great Lakes Power Company is as follows: 

The Billing Department constructs a flexible budget for each activity centre, based on the following ranges of cost-driver activity: 

1. Develop flexible-budget formulas for each of the four activity centres. Use the format illustrated in Exhibit 12-4. 

2. Compute the budgeted total cost in each activity centre for each of these levels of cost-driver activity: (a) the smallest activity in the relevant range, (b) the midpoint of the relevant range, and (c) the highest activity in the relevant range.

3. Determine the total cost function for the Billing Department. 

4. The following table gives the actual results for the Billing Department. Prepare a cost-control performance report comparing the flexible budget to actual results for each activity centre. Compute flexible-budget variances. 

Traceable Costs Activity Centre Variable Fixed Cost Driver Activity $ 79,910 $155,270 3,300 labour-hours 9,800 25,584 156,377 81,400 Account inquiry Correspondence Account billing Account verification 10,797 2,800 letters 2,440,000 lines 78,050 20,000 accounts Activity Centre Cost Driver Relevant Range Labour-hours Account inquiry Correspondence Account billing Account verification Accounts 5,000 3,000 2,500 3,500 2,000,000 3,000,000 15,000 25,000 Letters Lines