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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
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 80% 10,000 30,000 Overhead Budget Production in units Standard direct labor hours Budgeted overhead Variable overhead costs Indirect materials Indirect labor Power Maintenance Total variable costs Fixed overhead costs Rent of factory building Depreciation Machinery Taxes and insurance Supervisory salaries Total fixed costs Total overhead costs $ 30,000 40,000 8,000 3,000 81,000 31,000 45,000 3,600 16,400 96,000 $177,000 During March, the company operated at 90% capacity (11,250 units), and it incurred the following actual overhead costs. Overhead Costs Indirect materials Indirect labor Power Maintenance Rent of factory building Depreciation Machinery Taxes and insurance Supervisory salaries Total actual overhead costs $ 30,000 40,000 9,000 3,810 31,000 40,000 4,350 21,500 $179,660 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. Required 1 Required 2 Required 3 Compute the overhead controllable variance. Classify as favorable or unfavorable. (Do not round intermediate calculations.) 179,660 Controllable Variance Total actual overhead $ Flexible budget overhead Variable Fixed Total Overhead controllable variance Unfavorable Required 1 Required 2 > Required 1 Required 2 Required 3 Compute the overhead volume variance. Classify as favorable or unfavorable. (Do not round intermediate calculations.). Volume Variance Total budgeted fixed OH $ 96,000 Total fixed overhead applied | Volume variance Required 1 Required 3 > BLAZE CORP. Overhead Variance Report For Month Ended March 31 Flexible Budget Actual Results Variances Fav. / Unfav. Expected production volume Production level achieved Volume variance Controllable Variance Variable overhead costs: Indirect materials Indirect labor Power Maintenance Total variable costs Fixed overhead costs: Rent of factory building Depreciation-Machinery Supervisory salaries Total fixed costs Total overhead costs
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