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29) James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80%
29)
James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget: |
Operating Levels | |||
Overhead Budget | 80% | ||
Production in units | 10,000 | ||
Standard direct labor hours | 25,000 | ||
Budgeted overhead | |||
Variable overhead costs | |||
Indirect materials | $ | 15,000 | |
Indirect labor | 25,000 | ||
Power | 7,000 | ||
Maintenance | 3,000 | ||
Total variable costs | 50,000 | ||
Fixed overhead costs | |||
Rent of factory building | 25,000 | ||
Depreciationmachinery | 11,000 | ||
Supervisory salaries | 14,000 | ||
Total fixed costs | 50,000 | ||
Total overhead costs | $ | 100,000 | |
During May, the company operated at 90% capacity (11,250 units) and incurred the following actual overhead costs: |
Overhead Costs | ||
Indirect materials | $ | 15,000 |
Indirect labor | 27,725 | |
Power | 7,875 | |
Maintenance | 4,020 | |
Rent of factory building | 25,000 | |
Depreciationmachinery | 11,000 | |
Supervisory salaries | 17,600 | |
Total actual overhead costs | $ | 108,220 |
1. | Compute the overhead controllable variance. |
2. | Compute the overhead volume variance.(Do not round intermediate calculations.) |
3. | Prepare an overhead variance report at the actual activity level of 11,250 units. |
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