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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 1,330 Actual labour-hours 1,285 Standard labour-hours allowed for the actual number of cheques processed 1,350 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual (per Costs labour Incurred in hour) October $ 0.60 0.20 2.20 $ 780 317 3,527 $ 3.00 $4,624 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $7 per direct labour-hour. Actual fixed overhead costs totalled $7,350 In October, while the flexible budget was $7,000 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 (l.e., zero varlance).) PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Overhead costs Cost Actual Costs Formula Incurred for (per labour- 1,285 Labour- hour) Hours Flexible Budget Based on 1,285 Labour-Hours Flexible Budget Based on 1,350 Labour-Hours Total Variance Variable overhead costs: Office supplies $ 0.60 $ 780 Staff coffee lounge 0.20 317 Indirect labour 2.20 3,527 Total variable overhead cost $ 3.00 $ 4.624 Fixed overhead costs: Supervisory salaries Total overhead cost 7,350 $ 11.974 None U Breakdown of the Total Varance Spending (Budget) Variance Efficiency 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 1,330 Actual labour-hours 1,285 Standard labour-hours allowed for the actual number of cheques processed 1,350 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual (per Costs labour Incurred in hour) October $ 0.60 0.20 2.20 $ 780 317 3,527 $ 3.00 $4,624 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $7 per direct labour-hour. Actual fixed overhead costs totalled $7,350 In October, while the flexible budget was $7,000 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 (l.e., zero varlance).) PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Overhead costs Cost Actual Costs Formula Incurred for (per labour- 1,285 Labour- hour) Hours Flexible Budget Based on 1,285 Labour-Hours Flexible Budget Based on 1,350 Labour-Hours Total Variance Variable overhead costs: Office supplies $ 0.60 $ 780 Staff coffee lounge 0.20 317 Indirect labour 2.20 3,527 Total variable overhead cost $ 3.00 $ 4.624 Fixed overhead costs: Supervisory salaries Total overhead cost 7,350 $ 11.974 None U Breakdown of the Total Varance Spending (Budget) Variance Efficiency Variance

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 40P: The controller for Muir Companys Salem plant is analyzing overhead in order to determine appropriate...
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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 1,330 Actual labour-hours 1,285 Standard labour-hours allowed for the actual number of cheques processed 1,350 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual (per Costs labour Incurred in hour) October $ 0.60 0.20 2.20 $ 780 317 3,527 $ 3.00 $ 4,624 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $7 per direct labour-hour. Actual fixed overhead costs totalled $7,350 In October, while the flexible budget was $7,000 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 varlance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (l.e., zero varlance).) PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Overhead costs Cost Actual Costs Formula Incurred for (per labour- 1,285 Labour- hour) Hours Flexible Budget Based on 1,285 Labour-Hours Flexible Budget Based on 1,350 Labour-Hours Total Variance Variable overhead costs: Office supplies $ 0.60 $ 780 Staff coffee lounge 0.20 317 Indirect labour 2.20 3,527 Total variable overhead cost $ 3.00 $ 4,624 Fixed overhead costs: Supervisory salaries Total overhead cost 7,350 $ 11.974 F None U Breakdown of the Total Varance Spending (Budget) Variance Efficiency Variance
Transcribed Image Text: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 1,330 Actual labour-hours 1,285 Standard labour-hours allowed for the actual number of cheques processed 1,350 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual (per Costs labour Incurred in hour) October $ 0.60 0.20 2.20 $ 780 317 3,527 $ 3.00 $ 4,624 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $7 per direct labour-hour. Actual fixed overhead costs totalled $7,350 In October, while the flexible budget was $7,000 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 varlance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (l.e., zero varlance).) PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Overhead costs Cost Actual Costs Formula Incurred for (per labour- 1,285 Labour- hour) Hours Flexible Budget Based on 1,285 Labour-Hours Flexible Budget Based on 1,350 Labour-Hours Total Variance Variable overhead costs: Office supplies $ 0.60 $ 780 Staff coffee lounge 0.20 317 Indirect labour 2.20 3,527 Total variable overhead cost $ 3.00 $ 4,624 Fixed overhead costs: Supervisory salaries Total overhead cost 7,350 $ 11.974 F None U Breakdown of the Total Varance Spending (Budget) Variance Efficiency Variance
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