#1. James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 8,000 units (80% of its production capacity of 10,000 units) and prepared the following overhead budget:

	Operating Levels
Overhead Budget	80%
Production in units		8,000
Standard direct labor hours		22,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	13,200
Indirect labor		22,000
Power		8,800
Maintenance		4,400
Total variable costs		48,400
Fixed overhead costs
Rent of factory building		18,000
DepreciationMachinery		10,300
Supervisory salaries		17,900
Total fixed costs		46,200
Total overhead costs	$	94,600

During May, the company operated at 90% capacity (9,000 units) and incurred the following actual overhead costs:

Overhead costs (actual)
Indirect materials	$	13,200
Indirect labor		24,500
Power		9,900
Maintenance		5,560
Rent of factory building		18,000
DepreciationMachinery		10,300
Supervisory salaries		20,800
Total actual overhead costs	$	102,260

1. Compute the overhead controllable variance and classify it as favorable or unfavorable. 2. Compute the overhead volume variance and classify it as favorable or unfavorable. 3. Prepare an overhead variance report at the actual activity level of 9,000 units.

#2. Blaze Corp. applies overhead on the basis of direct labor hours. For the month of March, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following budget.

	Operating Levels
Overhead Budget	80%
Production in units		10,000
Standard direct labor hours		20,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	21,000
Indirect labor		25,000
Power		6,800
Maintenance		5,200
Total variable costs		58,000
Fixed overhead costs
Rent of factory building		24,000
DepreciationMachinery		28,000
Taxes and insurance		3,800
Supervisory salaries		12,200
Total fixed costs		68,000
Total overhead costs	$	126,000

During March, the company operated at 90% capacity (11,250 units), and it incurred the following actual overhead costs.

Overhead costs (actual)
Indirect materials	$	21,000
Indirect labor		25,000
Power		7,650
Maintenance		6,580
Rent of factory building		24,000
DepreciationMachinery		25,000
Taxes and insurance		4,650
Supervisory salaries		15,350
Total actual overhead costs	$	129,230

1. Compute the overhead controllable variance. 2. Compute the overhead volume variance. 3. Prepare an overhead variance report at the actual activity level of 9,000 units.