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:

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

A) Compute the overhead controllable variance and classify it as favorable or unfavorable.

B) Compute the overhead volume variance and classify it as favorable or unfavorable.

C) Prepare an overhead variance report at the actual activity level of 11,250 units.

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 $ 20,400 30,000 6,000 3,600 60,000 12,000 11,800 30, 200 54,000 $114,000 Total overhead costs Overhead costs (actual) Indirect materials Indirect labor Power Maintenance Rent of factory building Depreciation-Machinery Supervisory salaries Total actual overhead costs $ 20,400 33,350 6,750 4,880 12,000 11,800 33,500 $122,680 Controllable variance Total actual overhead Flexible budget overhead Total 0 Overhead controllable variance Volume Variance Volume variance JAMES CORP. Overhead Variance Report For Month Ended May 31 Expected production volume Production level achieved Volume variance Controllable Variance Flexible Budget Actual Results Variances Fav./Unfav. Variable overhead costs: Fixed overhead costs: Total overhead costs