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5 Item 21 Item 21 2 points James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company
5
Item 21
Item 21 2 points
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 | 28,000 | ||
Budgeted overhead | |||
Variable overhead costs | |||
Indirect materials | $ | 15,400 | |
Indirect labor | 28,000 | ||
Power | 7,000 | ||
Maintenance | 5,600 | ||
Total variable costs | 56,000 | ||
Fixed overhead costs | |||
Rent of factory building | 24,000 | ||
DepreciationMachinery | 10,900 | ||
Supervisory salaries | 15,500 | ||
Total fixed costs | 50,400 | ||
Total overhead costs | $ | 106,400 | |
|
During May, the company operated at 90% capacity (11,250 units) and incurred the following actual overhead costs:
Overhead Costs | |||
Indirect materials | $ | 15,400 | |
Indirect labor | 30,950 | ||
Power | 7,875 | ||
Maintenance | 6,940 | ||
Rent of factory building | 24,000 | ||
DepreciationMachinery | 10,900 | ||
Supervisory salaries | 19,000 | ||
Total actual overhead costs | $ | 115,065 | |
|
1. Compute the overhead controllable variance. 2. Compute the overhead volume variance. 3.
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