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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. Actual labour-hours. Standard labour-hours allowed for the actual number of cheques processed Variable overhead costs: Office supplies Staff coffee lounge. Indirect labour Total variable overhead cost Cost Formula (per labour hour) $ 1.10 0.30 2.70 $ 4.10 Actual Costs Incurred in October $ 1,391 463 2,980 $ 4,834 1,380 1,310 1,400 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 $6,200 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

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. Actual labour-hours. Standard labour-hours allowed for the actual number of cheques processed Variable overhead costs: Office supplies Staff coffee lounge. Indirect labour Total variable overhead cost Cost Formula (per labour hour) $ 1.10 0.30 2.70 $ 4.10 Actual Costs Incurred in October $ 1,391 463 2,980 $ 4,834 1,380 1,310 1,400 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 $6,200 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

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
Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
Problem 15E: Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing...
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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 Actual labour-hours Standard labour-hours allowed for the actual number of cheques processed Variable overhead costs: Office supplies Staff coffee lounge. Indirect labour Total variable overhead cost Cost Formula (per labour- hour) $ 1.10 0.30 2.70 $4.10 Actual Costs Incurred in October $ 1,391 463 2,980 $ 4,834 1,380 1,310 1,400 Fixed overhead at Pay Loans Company consists entirely supervisory salaries and is applied at a rate of $6 per direct labour-hour. Actual fixed overhead costs totalled $6,200 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 (i.e., zero 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 Actual labour-hours Standard labour-hours allowed for the actual number of cheques processed Variable overhead costs: Office supplies Staff coffee lounge. Indirect labour Total variable overhead cost Cost Formula (per labour- hour) $ 1.10 0.30 2.70 $4.10 Actual Costs Incurred in October $ 1,391 463 2,980 $ 4,834 1,380 1,310 1,400 Fixed overhead at Pay Loans Company consists entirely supervisory salaries and is applied at a rate of $6 per direct labour-hour. Actual fixed overhead costs totalled $6,200 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 (i.e., zero variance).)
Overhead costs Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Fixed overhead costs: Supervisory salaries Total overhead cost Cost Formula (per labour- hour) $ $ Actual Costs Incurred for 1,310 Labour- Hours 1.10 S 0.30 2.70 4.10 $ $ 1,391 463 2,980 4,834 6,200 11,034 PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Flexible Budget Based on 1,310 Labour-Hours Flexible Budget Based on 1,400 Labour-Hours Total Variance Breakdown of the Total Variance Spending (Budget) Variance Efficiency Variance
Transcribed Image Text:Overhead costs Variable overhead costs: Office supplies Staff coffee lounge Indirect labour Total variable overhead cost Fixed overhead costs: Supervisory salaries Total overhead cost Cost Formula (per labour- hour) $ $ Actual Costs Incurred for 1,310 Labour- Hours 1.10 S 0.30 2.70 4.10 $ $ 1,391 463 2,980 4,834 6,200 11,034 PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Flexible Budget Based on 1,310 Labour-Hours Flexible Budget Based on 1,400 Labour-Hours Total Variance Breakdown of the Total Variance Spending (Budget) Variance Efficiency Variance
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