Exercise 08-21 Overhead controllable and volume variances; overhead variance report LO P4 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 80% 10,000 26,000 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 Supervisory salaries Total fixed costs Total overhead costs $ 15,600 26,000 7,800 2,600 52,000 22,000 10,700 21,900 54,600 $ 106,600 During May, the company operated at 90% capacity (11,250 units) and incurred the following actual overhead costs: Overhead costs (actual) Indirect materials Indirect labor Power Maintenance Rent of factory building Depreciation-Machinery Supervisory salaries Total actual overhead costs $ 15,600 28,800 8,775 3,555 22,000 10,700 25,200 $114,630 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 11,250 units. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the overhead controllable variance and classify it as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.) Controllable variance $ 114,6301 $ Total actual overhead Flexible budget overhead Variable Fixed Total Overhead controllable variance 58,500 54,600 113,100 1,530 Unfavorable $ Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the overhead volume variance and classify it as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Do not round intermediate calculations.) Volume Variance Volume variance Prepare an overhead variance report at the actual activity level of 11,250 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.). JAMES CORP Overhead Variance Report For Month Ended May 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 Fixed overhead costs: Rent of factory building DepreciationMachinery Supervisory salaries Total overhead costs
