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	$	20,000
Indirect labor		25,000
Power		6,200
Maintenance		4,800
Total variable costs		56,000
Fixed overhead costs
Rent of factory building		21,000
DepreciationMachinery		30,000
Taxes and insurance		3,700
Supervisory salaries		11,300
Total fixed costs		66,000
Total overhead costs	$	122,000

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

Overhead costs (actual)
Indirect materials	$	20,000
Indirect labor		25,000
Power		6,975
Maintenance		6,120
Rent of factory building		21,000
DepreciationMachinery		28,000
Taxes and insurance		4,500
Supervisory salaries		15,800
Total actual overhead costs	$	127,395

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Prepare an overhead variance report at the actual activity level of 9,000 units. Classify as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Do not round intermediate calculations.)

BLAZE CORP.

Overhead Variance Report

For Month Ended March 31

Expected production volume

80% of capacity

Production level achieved

90% of capacity

Volume variance

$8,250

Favorable

Controllable Variance

Flexible Budget

Actual Results

Variances

Fav. / Unfav.

Variable overhead costs:

Indirect materials

22,500

20,000

2,500

Favorable

Indirect labor

28,125

25,000

3,125

Favorable

Power

6,975

6,975

0

No variance

Maintenance

6,120

Unfavorable

57,600

58,095

Favorable

Fixed overhead costs:

Rent of factory building

21,000

21,000

0

No variance

DepreciationMachinery

28,000

Favorable

Taxes and insurance

4,500

Unfavorable

Supervisory salaries

15,800

Unfavorable

Total fixed costs

21,000

69,300

Unfavorable

Total overhead costs

$78,600

$127,395

Favorable