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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 1,500 Actual labour-hours 1,460 Standard labour-hours allowed for the actual number of cheques processed 1,520 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual (per Costs labour Incurred in hour) October $ 0.90 0.50 3.90 $ 1,277 710 4,325 $ 5.30 $ 6,312 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $6 per direct labour-hour. Actual fixed overhead costs totalled $6,400 In October, while the flexible budget was $6,000 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).) Overhead costs Cost Actual Costs Formula Incurred for (per labour- 1,460 Labour- hour) Hours Variable overhead costs: Office supplies $ 0.90 $ 1,277 Staff coffee lounge 0.50 710 Indirect labour 3.90 4,325 Total variable overhead cost $ 5.30 $ 6,312 Fixed overhead costs: Supervisory salaries Total overhead cost 6.400 $ 12,712 PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Flexible Budget Based on 1,460 Labour-Hours Flexible Budget Based on 1,520 Labour-Hours Total Variance F None U Breakdown of the Total Variance 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 1,500 Actual labour-hours 1,460 Standard labour-hours allowed for the actual number of cheques processed 1,520 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual (per Costs labour Incurred in hour) October $ 0.90 0.50 3.90 $ 1,277 710 4,325 $ 5.30 $ 6,312 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $6 per direct labour-hour. Actual fixed overhead costs totalled $6,400 In October, while the flexible budget was $6,000 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).) Overhead costs Cost Actual Costs Formula Incurred for (per labour- 1,460 Labour- hour) Hours Variable overhead costs: Office supplies $ 0.90 $ 1,277 Staff coffee lounge 0.50 710 Indirect labour 3.90 4,325 Total variable overhead cost $ 5.30 $ 6,312 Fixed overhead costs: Supervisory salaries Total overhead cost 6.400 $ 12,712 PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Flexible Budget Based on 1,460 Labour-Hours Flexible Budget Based on 1,520 Labour-Hours Total Variance F None U Breakdown of the Total Variance Spending (Budget) Variance Efficiency Variance

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 1,500 Actual labour-hours 1,460 Standard labour-hours allowed for the actual number of cheques processed 1,520 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual (per Costs labour Incurred in hour) October $ 0.90 0.50 3.90 $ 1,277 710 4,325 $ 5.30 $ 6,312 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $6 per direct labour-hour. Actual fixed overhead costs totalled $6,400 In October, while the flexible budget was $6,000 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).) Overhead costs Cost Actual Costs Formula Incurred for (per labour- 1,460 Labour- hour) Hours Variable overhead costs: Office supplies $ 0.90 $ 1,277 Staff coffee lounge 0.50 710 Indirect labour 3.90 4,325 Total variable overhead cost $ 5.30 $ 6,312 Fixed overhead costs: Supervisory salaries Total overhead cost 6.400 $ 12,712 PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Flexible Budget Based on 1,460 Labour-Hours Flexible Budget Based on 1,520 Labour-Hours Total Variance F None U Breakdown of the Total Variance 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 1,500 Actual labour-hours 1,460 Standard labour-hours allowed for the actual number of cheques processed 1,520 Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Cost Formula Actual (per Costs labour Incurred in hour) October $ 0.90 0.50 3.90 $ 1,277 710 4,325 $ 5.30 $ 6,312 Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $6 per direct labour-hour. Actual fixed overhead costs totalled $6,400 In October, while the flexible budget was $6,000 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).) Overhead costs Cost Actual Costs Formula Incurred for (per labour- 1,460 Labour- hour) Hours Variable overhead costs: Office supplies $ 0.90 $ 1,277 Staff coffee lounge 0.50 710 Indirect labour 3.90 4,325 Total variable overhead cost $ 5.30 $ 6,312 Fixed overhead costs: Supervisory salaries Total overhead cost 6.400 $ 12,712 PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Flexible Budget Based on 1,460 Labour-Hours Flexible Budget Based on 1,520 Labour-Hours Total Variance F None U Breakdown of the Total Variance Spending (Budget) Variance Efficiency Variance
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