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		28,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	15,400
Indirect labor		28,000
Power		7,000
Maintenance		5,600
Total variable costs		56,000
Fixed overhead costs
Rent of factory building		24,000
DepreciationMachinery		10,900
Supervisory salaries		15,500
Total fixed costs		50,400
Total overhead costs	$	106,400

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

Overhead costs (actual)
Indirect materials	$	15,400
Indirect labor		30,950
Power		7,875
Maintenance		6,940
Rent of factory building		24,000
DepreciationMachinery		10,900
Supervisory salaries		19,000
Total actual overhead costs	$	115,065

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 Flexible Budget Actual Results Variances Fav./Unfav. Expected production volume Production level achieved Volume variance Controllable Variance 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