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		32,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	22,400
Indirect labor		32,000
Power		6,400
Maintenance		3,200
Total variable costs		64,000
Fixed overhead costs
Rent of factory building		16,000
DepreciationMachinery		11,300
Supervisory salaries		30,300
Total fixed costs		57,600
Total overhead costs	$	121,600

During May, the company operated at 90% capacity (9,000 units) and incurred the following actual overhead costs:

Overhead costs (actual)
Indirect materials	$	22,400
Indirect labor		35,850
Power		7,200
Maintenance		4,405
Rent of factory building		16,000
DepreciationMachinery		11,300
Supervisory salaries		33,100
Total actual overhead costs	$	130,255

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.

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: Indirect materials Indirect labor Power Maintenance 25,200 36,000 7, 200 3,600 22,400 35,850 ,200 4,405 2,800 Favorable 150 Favorable 01 805 Unfavorable 7 72,000 69,855 3,755 Fixed overhead costs: Rent of factory building DepreciationMachinery Supervisory salaries 16,000 11,300 30,300 16,000 11,300 33,100 0 2,800 Unfavorable 57,600 129,600 60,400 130,255 Total overhead costs $ $ 955 Unfavorable