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 1,500 1,460 the actual number of cheques processed 1,520 Cost Formula Actual Costs (per labour Incurred in hour) October Variable overhead costs Office supplies Staff coffee lounge Indirect labour $0.90 0.50 3.90 $1,277 710 4,325 Total variable overhead $5.30 $6,312 cost