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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Topic Video
Question
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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education