James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 8,000 units (80% of its production capacity of 10,000 units) and prepared the following overhead budget: Operating Levels Overhead Budget 80 Production in units 8,000 Standard direct labor hours 30,000 Budgeted overhead Variable overhead costs Indirect materials $ 21,000 Indirect labor 30.000 Power 7,200 Maintenance 4,800 Total variable costs 63,000 Fixed overhead costs Rent of factory building 17,000 Depreciation Machinery 11,400 Supervisory salaries 25,600 Total fixed costs 54,000 Total overhead costs $117,000 During May, the company operated at 90% capacity (9,000 units) and incurred the following actual overhead costs: During May, the company operated at 90% capacity (9,000 units) and incurred the following actual overhead costs: Overhead costs (actual) Indirect materials $ 21,000 Indirect labor 33,550 Power 8, 100 Maintenance 6,210 Rent of factory building 17,000 Depreciation Machinery 11,400 Supervisory salaries 28,500 Total actual overhead costs $125,760 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 9,000 units