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		30,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	21,000
Indirect labor		30,000
Power		6,000
Maintenance		3,000
Total variable costs		60,000
Fixed overhead costs
Rent of factory building		14,000
DepreciationMachinery		11,100
Supervisory salaries		28,900
Total fixed costs		54,000
Total overhead costs	$	114,000

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

Overhead costs (actual)
Indirect materials	$	21,000
Indirect labor		33,300
Power		6,750
Maintenance		4,025
Rent of factory building		14,000
DepreciationMachinery		11,100
Supervisory salaries		32,600
Total actual overhead costs	$	122,775

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.

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 $ 122,775 Flexible budget overhead Variable $ 60,000 X Fixed 54,000 Total 114,000 8,775 X Favorable Overhead controllable variance $ 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 budgeted fixed OH Total fixed overhead applied 54,000 57,700 X 3,700 X Volume variance $ Unfavorable Daquired Dequired 2 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 Expected production volume Production level achieved 80% of capacity 90% of capacity Volume variance $ 1,250 Favorable Actual Results Controllable Variance Flexible Budget Variances Fav./Unfav. Variable overhead costs: Indirect materials $ $ 0 X No variance 21,000 X $ 30,000 x Indirect labor 21,000 33,300 6,750 4,025 Power 6,000 3,300 X Unfavorable 750 X Unfavorable 1,025 X Unfavorable X Maintenance 3,000 Total variable costs 60,000 65,075 5,075 Unfavorable 0 No variance Fixed overhead costs: Rent of factory building DepreciationMachinery Supervisory salaries 14,000 11,100 14,000 11,100 0 No variance 28,900 32,600 3,700 Unfavorable Total fixed costs 54,000 57,700 3,700 Unfavorable Total overhead costs 114,000 $ 122,775 $ 8,775 X Unfavorable