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 sex 19, eee 30,eee Overhead Budget Production in units Standard direct labor hours Budgeted overhead Variable overhead costs Indirect materials Indirect labor $ 15,00 30,000 7,200 Power Maintenance 4,800 57,600 Total variable costs Fixed overhead costs Rent of factory building Depreciation-Machinery Supervisory salaries Total fixed costs 15,000 12,100 23, gee 51,888 Total overhead costs $108,000 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 $ 15,000 33,480 8,180 6,245 15,00 12,180 27, see Rent of factory building Depreciation-Machinery Supervisory salaries Total actual overhead costs $117,345 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 varlance report at the actual activity level of 11.250 units. 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 Total actual overhead $ 117,345 Flexible budget overhead Fixed $ 51.000 Variable Total 51.000 Overhead controllable variance Unfavorable Required 1 Required 2 > 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 Total fixed overhead applied Total budgeted faced OH Volume variance 51,000 Favorable Required 1 Required 2 Required 3 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 Expected production volume For Month Ended May 31 80% of capacity 00% of capacity Favorable Production level achieved Volume variance Controllable Variance Flexible Budget Actual Results Variances Fav./Unfav. Variable overhead costs: Indirect materials 15.000 Indirect labor 33,400 Power 8.100 Maintenance 6.245 Unfavorable Total variable costs 62.745 Unfavorable Fixed overhead costs: 15.000 15,000 Rent of factory building Depreciation-Machinery 12.100 12.100 27,500 O No variance o No variance 3.600 Unfavorable Supervisory salaries 23.900 Total fixed costs 51.000 54,800 3.600 Unfavorable Unfavorable Total overhead costs $ 51,000 $ 117,345
