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		27,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	16,200
Indirect labor		27,000
Power		5,400
Maintenance		5,400
Total variable costs		54,000
Fixed overhead costs
Rent of factory building		23,000
DepreciationMachinery		10,800
Supervisory salaries		14,800
Total fixed costs		48,600
Total overhead costs	$	102,600

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

Overhead costs (actual)
Indirect materials	$	16,200
Indirect labor		29,875
Power		6,075
Maintenance		6,710
Rent of factory building		23,000
DepreciationMachinery		10,800
Supervisory salaries		18,200
Total actual overhead costs	$	110,860

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.

Complete this question by entering your answers in the tabs below.

Compute the overhead controllable variance and classify it as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)

Controllable variance
Total actual overhead		$110,860
Flexible budget overhead
Variable
Fixed	48,600
Total		48,600
Overhead controllable variance			Unfavorable

Compute the overhead volume variance and classify it as favorable or unfavorable. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance. Do not round intermediate calculations.)

Volume Variance
Total budgeted fixed OH	$48,600
Total fixed overhead applied
Volume variance		Favorable

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

Expected production volume

80% of capacity

Production level achieved

90% of capacity

Volume variance

Favorable

Controllable Variance

Flexible Budget

Actual Results

Variances

Fav./Unfav.

Variable overhead costs:

Indirect materials

Favorable

Indirect labor

Favorable

Power

No variance

Maintenance

Unfavorable

Total variable costs

Favorable

Fixed overhead costs:

Rent of factory building

No variance

DepreciationMachinery

No variance

Supervisory salaries

Total fixed costs

Unfavorable

Total overhead costs

Unfavorable