Question

The cheque-clearing office of Pay Loans Company is responsible for processing all cheques that come to the company for payment. Managers at the company believe that variable overhead costs are essentially proportional to the number of labour-hours worked in the office, so labour-hours are used as the activity base when preparing variable overhead budgets and performance reports. Data for October, the most recent month, appear below:

Budgeted labour-hours		1,390
Actual labour-hours		1,315
Standard labour-hours allowed for the actual     number of cheques processed		1,410

	Cost Formula (per labour-hour)			Actual Costs Incurred in October
Variable overhead costs:
Office supplies	$	1.20		$	1,512
Staff coffee lounge		0.20			333
Indirect labour		2.80			2,600
Total variable overhead cost	$	4.20		$	4,445

Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $4 per direct labour-hour. Actual fixed overhead costs totalled $4,150 in October, while the flexible budget was $4,000 for the month.

Required:

Prepare an overhead performance report for October for the cheque-clearing office that includes both spending and efficiency variances for variable overhead and the budget variance for fixed overhead. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

The cheque-clearing office of Pay Loans Company is responsible for processing all cheques that come to the company for payment. Managers at the company believe that variable overhead costs are essentially proportional to the number of labour-hours worked in the office, so labour-hours are used as the activity base when preparing variable overhead budgets and performance reports. Data for October, the most recent month, appear below:

Budgeted labour-hours		1,390
Actual labour-hours		1,315
Standard labour-hours allowed for the actual     number of cheques processed		1,410

	Cost Formula (per labour-hour)			Actual Costs Incurred in October
Variable overhead costs:
Office supplies	$	1.20		$	1,512
Staff coffee lounge		0.20			333
Indirect labour		2.80			2,600
Total variable overhead cost	$	4.20		$	4,445

Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $4 per direct labour-hour. Actual fixed overhead costs totalled $4,150 in October, while the flexible budget was $4,000 for the month.

Required:

Prepare an overhead performance report for October for the cheque-clearing office that includes both spending and efficiency variances for variable overhead and the budget variance for fixed overhead. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

The cheque-clearing office of Pay Loans Company is responsible for processing all cheques that come to the company for payment. Managers at the company believe that variable overhead costs are essentially proportional to the number of labour-hours worked in the office, so labour-hours are used as the activity base when preparing variable overhead budgets and performance reports. Data for October, the most recent month, appear below:

Budgeted labour-hours		1,390
Actual labour-hours		1,315
Standard labour-hours allowed for the actual     number of cheques processed		1,410

	Cost Formula (per labour-hour)			Actual Costs Incurred in October
Variable overhead costs:
Office supplies	$	1.20		$	1,512
Staff coffee lounge		0.20			333
Indirect labour		2.80			2,600
Total variable overhead cost	$	4.20		$	4,445

Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $4 per direct labour-hour. Actual fixed overhead costs totalled $4,150 in October, while the flexible budget was $4,000 for the month.

Required:

Prepare an overhead performance report for October for the cheque-clearing office that includes both spending and efficiency variances for variable overhead and the budget variance for fixed overhead. (Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Answer 1

Answer:

PAY LOANS COMPANY OVERHEAD PERFORMANCE REPORT For the Month of October (3) Overhead costs Cost formula (per direct labor hour) (1) (2) Actual costs Budget based on Budget based on 1315 direct 1315 direct 1410 direct labor hours labor hours labor hours Total flexible budget variance (1)-(3) Spending variance (1)-(2) Efficiency variance (2) - (3) $ 1,692 $ $ $ 2821 Variable overhead costs: Office supplies Staff Coffee lounge Indirect labor Total Variable overhead costs Fixed overhead costs: Supervisory salaries Total overhead costs 1.20 0.20 2.80 4.20 1,512$ 333 2,600 4,445 263 3,682 5,523 180 F 51 U 1,348 F 1,477 F 66 F 70 U 1,082 F 1,078 F 3,948 5,922 19 266 399 F F F 4,150 8,595 4,000 9,523 4,000 9,922 150 U 1,327 F 150 928 U F $ $ $ $ $ 399 F