Hastings Company bases its variable overhead performance report on the actual direct labour- hours of the period. Data concerning the most recent year, which ended on December 31, are as follows:

Budgeted direct labour-hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,000

Actual direct labour-hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,000

Standard direct labour-hours allowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000

Cost formula (per direct labour-hour):

Indirect labour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.90

Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.15

Electricity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.05

Actual costs incurred:

Indirect labour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $42,000

Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,900

Electricity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,800

Required:

Prepare a variable overhead performance report using the format in Exhibit 10€“13. Compute both variable overhead spending and efficiency variances.

Exhibit 10-13

HEIRLOOM PEWTER CORPORATION Overhead Performance Report For the Month Ended June 30 Budget allowances are based on the direct labour-hours that should have been used (5,000) to produce 2,000 units and the hours actually worked (5,400). This approach yields both a spending and an efficiency variance for variable manufacturing overhead. Actual production (units) Actual direct labour-hours......... Standard direct labour-hours allowed. 2,000 5,400 . 5,000 Breakdown of the Total Flexible Budget Variance (1) Actual Costs (2) Budget Based on 5,400 Direct Labour-Hours* (3) Budget Based on 5,000 Direct Labour-Hours Total Flexible Budget Variance Cost Formula Spending (Budget) Variance (1) (2) Efficiency Variance (2) (3) (per Direct Labour-Hour) 5,400 Direct Labour-Hours Overhead Costs (1) (3)' Variable overhead costs: Indirect labour Lubricants Power ....... $ 600 U 400 U 200 U _1,200 U $ 8,100 $ 330 U $ 1.50 1.00 $ 7,830 $ 7.500 $ 270 F 378 F 162 F 22 U 38 U 390 U 5,400 5,000 5,022 2,538 2,700 16.200 0.50 2,500 Total variable overhead cost.. Fixed overhead costs: $3.00 810 F 15.390 15,00 Depreciation. Supervisory salaries Insurance...... Total fixed overhead cost..... Total overhead cost.. 10,000 10,000 10,000 2,000 U 500 U 2,500 U $1,690 U 2,000 U 14,000 12.000 12.000 500 U 2,500 U $2,890 U 3.500 3,000 3,000 25,000 $41,200 25,000 $40,000 27,500 $1,200 U $42,890 *Budget amounts for variable overhead costs are determined by multiplying budgeted direct labour-hours by the cost formula amount (per direct labour-hour). For example, indirect labour costs of $8,100o for 5.400 hours = $150 x 5.400. +Total variable and fixed overhead variances as per Exhibits 10-7 (variable overhead) and 10-1 (fixed overhead).