Managerial accounting

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 1,420 Actual labour-hours 1,330 Standard labour-hours allowed for the actual number of cheques processed 1,440 Cost Formula Actual Costs (per labour- Incurred in hour) October Variable overhead costs: Office supplies $ 1.50 $ 1,900 Staff coffee lounge 0.30 449 Indirect labour 3.10 3,600 Total variable overhead cost $4.90 $5,949Fixed 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 $6,120 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).) PAY LOANS COMPANY Overhead Performance Report For the Month Ended October 31 Breakdown of the Total Variance Cost Actual Costs Flexible Flexible Overhead costs Formula Incurred for Budget Based Budget Based Spending Efficiency (per labour- 1,330 Labour- on 1,330 on 1,440 Total Variance (Budget) Variance hour Hours Labour-Hours Labour-Hours Variance Variable overhead costs: Office supplies 1.50 $ 1,900 Staff coffee lounge 0.30 449 Indirect labour 3.10 3,600 Total variable overhead cost $ 4.90 $ 5.949 Fixed overhead costs: Supervisory salaries 6,120 Total overhead cost 12,069