Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 1,430
Actual labour-hours 1,335
Standard labour-hours allowed for the actual number of cheques processed 1,450

Cost Formula (per labour-hour) Actual Costs Incurred in October
Variable overhead costs:
Office supplies $ 1.60 $ 2,074
Staff coffee lounge 0.40 584
Indirect labour 3.20 3,600
Total variable overhead cost $ 5.20 $ 6,258

Fixed overhead at Pay Loans Company consists entirely of supervisory salaries and is applied at a rate of $4 per direct labour-hour. Actual fixed overhead costs totalled $4,400 in October, while the flexible budget was $4,000 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).)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Audits In The Democratic Republic Of Congo

Authors: Charles Kyungu Kakudji

1st Edition

6206327043, 978-6206327042

More Books

Students also viewed these Accounting questions