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 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 Supervisory salaries Total fixed costs Total overhead costs $ 21,000 30,000 6,000 3,000 60,000 14,000 11,100 28,900 54,000 $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 Indirect labor Power Maintenance Rent of factory building Depreciation-Machinery Supervisory salaries Total actual overhead costs $ 21,000 33,300 6,750 4,025 14,000 11,100 32,600 $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. 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 80% of capacity Expected production volume Production level achieved 90% of capacity Volume variance $ 6,750 Favorable Actual Results Controllable Variance Flexible Budget Variances Fav./Unfav. Variable overhead costs: Indirect materials Indirect labor $ 21,000 33,300 6,750 4,025 Power Maintenance Total variable costs > 65,075 Fixed overhead costs: Rent of factory building DepreciationMachinery Supervisory salaries 14,000 11,100 32,600 Total fixed costs 57,700 Total overhead costs $ 122,775