Question

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 8004 10,000 26,000 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 $18,200 26,000 5,200 2,600 52,000 19,000 11,600 16,280 46,880 $98,800 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 $ 18,200 28,950 5,850 3,745 19,000 11,630 19,380 $106,645 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.

Answer 1

Solution 1 and 2:

L M N O AK $106,645.00 Controllable Variance Total actual overhead Flexible Budget Overhead Fixed $46,800.00 Variable $58,500.00 Total Overhead controllable variance $105,300.00 $1,345.00 Unfavorable 11 12 13 Volume Variance Total Budgeted Fixed overhead $46,800.00 Total fixed overhead applied $52,650.00 Volume Variance $5,850.00 Favorable 39 40 et506 Sheet93 (2) Sheet334 Sheet338 Sheet176 (2)

Solution 3:

F James Corp Overhead variance Report For the month ended May 31 80% of capacity 90% of capacity $5,850.00 Favorable Flexible budget Actual results 7 Prod 8 9 Variances Fav/Unfav. 10 11 12 13 14 15 Expected production volume Production level achieved Volume variance Controllable variance Variable overhead costs: Indirect material Indirect labor Power Maintenance Total variable costs Fixed overhead costs: Rent of factory building Depreciation - Machinery Supervisory salaries Total fixed costs $20,475.000 $29,250.00 $5,850.00 $2,925.00 $58,500.00 $18,200.00 $28,950.00 $5,850.00 $3,745.00 $56,745.00 $2,275.00 Favorable $300.00 Favorable $0.00 No Variance $820.00 Unfavorable $1,755.00 Favorable 16 17 18 19 $19,000.00 $11,600.00 $16,200.00 $46,800.00 $19,000.00 $11,600.000 $19,300.00 $49,900.00 $0.00 No Variance $0.00 No Variance $3,100.00 Unfavorable $3,100.00 Unfavorable 20 Total overhead costs $105,300.00 $106,645.00 $1,345.00 Unfavorable et506 Sheet93 (2) Sheet334 Sheet338 Sheet176 (2)