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		26,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	18,200
Indirect labor		26,000
Power		5,200
Maintenance		2,600
Total variable costs		52,000
Fixed overhead costs
Rent of factory building		19,000
DepreciationMachinery		11,600
Supervisory salaries		16,200
Total fixed costs		46,800
Total overhead costs	$	98,800

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:

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		26,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	18,200
Indirect labor		26,000
Power		5,200
Maintenance		2,600
Total variable costs		52,000
Fixed overhead costs
Rent of factory building		19,000
DepreciationMachinery		11,600
Supervisory salaries		16,200
Total fixed costs		46,800
Total overhead costs	$	98,800

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

Overhead costs (actual)
Indirect materials	$	18,200
Indirect labor		28,950
Power		5,850
Maintenance		3,745
Rent of factory building		19,000
DepreciationMachinery		11,600
Supervisory salaries		19,300
Total actual overhead costs	$	106,645

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.

1.	Compute the overhead controllable variance.

Total actual overhead
Flexible budget overhead
Total		0
Overhead controllable variance

2.

Compute the overhead volume variance. (Do not round intermediate calculations.)

Volume Variance
Volume variance

3.

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

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