Springfield Bank originates mortgage loans for residential housing. The company

Question

Springfield Bank originates mortgage loans for residential housing. The company charges a service fee for processing loan applications. This fee is set twice a year based on the cost of processing a loan application. For the first half of this year, the bank estimated that it would process 230 loans. Correspondence, credit reports, supplies, and other materials that vary with each loan are estimated to cost $60.50 per loan. The company hires a loan processor at an estimated cost of $85,000 per year and an assistant at an estimated cost of $55,000 per year. The cost to lease office space and pay utilities and other related costs is estimated to be $139,000 per year. During the first six months of this year, Springfield Bank processed 250 loans. Cost of materials, credit reports, and other items related to loan processing were 12 percent higher than expected for the volume of loans processed. The loan processor and her assistant cost $70,500 for the six months. Leasing and related office costs were $65,500 for the six months. Required: Compute the variances for Springfield Bank. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Do not round your intermediate calculations. Round your final answer to the nearest dollar amount.)

Explanation / Answer

Calculation of Combined Variances:

For Correspondence, Supplies etc.:

Standard Cost (250 Loans *$60.50)

$      15,125

Actual Cost (15125*112%)

$      16,940

Combined Variances = (16940-15125)

$        1,815

U

For Loan processor and other Costs :

Standard Cost for 6 months (85000+55000+139000)/2

$     139,500

Actual Cost for 6 months (70500+65500)

$     136,000

Combined Variances = (16940-15125)

$        3,500

F

Calculation of Combined Variances:

For Correspondence, Supplies etc.:

Standard Cost (250 Loans *$60.50)

$      15,125

Actual Cost (15125*112%)

$      16,940

Combined Variances = (16940-15125)

$        1,815

U

For Loan processor and other Costs :

Standard Cost for 6 months (85000+55000+139000)/2

$     139,500

Actual Cost for 6 months (70500+65500)

$     136,000

Combined Variances = (16940-15125)

$        3,500

F

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