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		30,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	20,400
Indirect labor		30,000
Power		6,000
Maintenance		3,600
Total variable costs		60,000
Fixed overhead costs
Rent of factory building		12,000
Depreciationmachinery		11,800
Supervisory salaries		30,200
Total fixed costs		54,000
Total overhead costs	$	114,000

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

Overhead Costs
Indirect materials	$	20,400
Indirect labor		33,350
Power		6,750
Maintenance		4,880
Rent of factory building		12,000
Depreciationmachinery		11,800
Supervisory salaries		33,500
Total actual overhead costs	$	122,680

1.

Compute the overhead controllable variance.

Total actual overhead		$122,680
Flexible budget overhead
Variable	$60,000
Fixed	54,000
Total		114,000
Overhead controllable variance		$8,680	Unfavorable

2.

Compute the overhead volume variance. (Do not round intermediate calculations.)

Volume Variance
Total budgeted fixed OH	$54,000
Total fixed overhead applied
Volume variance

3.	Prepare an overhead variance report at the actual activity level of 11,250 units.

JAMES CORP.

Overhead Variance Report

For Month Ended May 31

Expected production volume

Production level achieved

Volume variance

Controllable Variance

Flexible Budget

Actual Results

Variances

Fav./Unfav.

Variable overhead costs:

Indirect materials

Indirect labor

Power

Maintenance

Total variable costs

Fixed overhead costs:

Rent of factory building

DepreciationMachinery

Supervisory salaries

Total fixed costs

Total overhead costs