Chapter 17, Problem 46P

Nonmanufacturing Cost Variances

FSBCU is a financial institution that originates mortgage loans. The company charges a service fee for processing loan applications. This fee is set twice a year based on the cost of processing a loan application. For the first half of this year, the bank estimated that it would process 360 loans. Correspondence, credit reports, supplies, and other materials that vary with each loan are estimated to cost $45 per loan. The company hires a loan processor at an estimated cost of $90,000 per year and an assistant at an estimated cost of $70,000 per year. The cost to lease office space and pay utilities and other related costs is estimated to be $195,000 per year.

During the first six months of this year, FSBCU processed 384 loans. Cost of materials, credit reports, and other items related to loan processing were 5 percent lower than expected for the volume of loans processed.

The loan processor and her assistant cost $84,000 for the six months. Leasing and related office costs were $98,500 for the six months.

Required

Prepare an analysis of the variances for FSBCU. (Hint: Loans are the output.)