. The cheque-clearing office of Pay Loans Company is responsible for processing all cheques...
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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: 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 $4,200 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).)
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