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% 19, eee 25,00 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 $18,00 25, eee 5, eee 2.eee 50,00 18,00 11,500 15, see 45, eee $95,000 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 $ 18,00 27,875 5,625 3,065 18,888 11,500 18, see $102,565 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. Controllable variance Total actual overhead Flexible budget overhead 0 Total 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 Flexible Budget Actual Results Variances Fav./Unfav. Controllable Variance Variable overhead costs: Fixed overhead costs: Total overhead costs