Question

James Corp. applies overhead on the basis of direct labor hours.

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 Overhead Budget Production in units Standard direct labor hours Budgeted overhead 88% 10,000 25,800 Varlable overhead costs Indirect materials Indirect labor Power Maintenance Total variable costs $18,800 25,000 5,000 50.000 Fixed overhead costs Rent of factory building Depreciation-Machinery Supervisory salarles Total fixed costs 18,000 11,500 15,500 45.000 $95,000 Total overhead costs During May, the company operated at 90% capacity (11,250 units) and incurred the following actual overhead costs. Overhead Costs Fixed overhead costs Rent of factory building Depreciation-Machinery Supervisory salaries Total fixed costs 18,800 11,500 15,500 45,000 $95,000 Total overhead costs During May, the com pany operated at 90% capacity (11,250 units) and incurred the following actual overhead costs. Overhead Costs Indirect materials Indirect labor Power Maintenance Rent of factory buślding Depreciation-lachinery Supervisory salarLes $ 18,000 27,875 s,625 3,065 18,000 11,500 18,500 5102, 565 Total actual overhead costs 1. Compute the overhead controlläble variance 2. Compute the overhead volume variance 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the overhead controllable variance. Classify as favorable or unfavorable. Controllable variance Total actual overhead Flexible budget overhead Total Overhead controllable variance Required 2 Required 1 Reapired 2 Required 3 Compute the overhead volume variance. Classify as favorable or unfavorable. (Do not round intermediate calculations.) Volume Variance Volume variance Required 1 Required 3 Prepare an overhead varlance report at the actual activity level of 11,250 units. Classify as favorable or unfavorable. (Do not round intermediate calculations.) JAMES CORP Overhead Variance Report For Month Ended May 31 Expected production volume Production level achieved Volume variance Controllable Varilance Flexible Budget Actual Results VariancesFav/Unfav Variable overhead costs Fixed overhead costs Production level achieved Volume variance Controllable Variance Flexible Budget Actual Results VariancesFav/Unfav Variable overhead costs Fixed overhead costs Total overhead costs

Answer 1

1.

Controllable Variance Total actual overhead $102,565 Flexible budget overhead Variable (note 1) $56,250 Fixed $45,000 Total $101,250 Overhead controllable variance $1,315 UnFavorable

Note 1: Variable Flexible Budget Overhead:

Budgeted Variable Overhead Cost / Budgeted Operating Capacity * Actual Operating Capacity

= 50000 / 80% x 90%

= $56,250

2.

Volume Variance
Total Budgeted Fixed OH	$45,000
Total fixed Overhead applied(Note 2)	$50,625
Volume Variance	$5,625	Favorable

Note 2: Total fixed overhead applied

= Predetermined rate x Actual output

= 45000 / 10000 x 11250

= 50625

3.

JAMES CORP.
OVERHEAD VARIANCE REPORT
FOR MONTH ENDED MAY 31
Expected Production Volume	80% of Capacity
Production Level Achieved	90% of Capacity
Volume Variance	$5,625	Favorable
Controllable Variance	Flexible Budget	Actual Result	Variances	Fav. / Unfav
Variable Overhead Costs
Indirect Materials	20250	18000	2250	Favorable
Indirect Labor	28125	27875	250	Favorable
Power	5625	5625	-	No variance
Maintenance	2250	3065	815	UnFavorable
Total Variable Cost	56250	54565	1685	Favorable
Fixed Overhead Cost
Rent of Factory Building	18000	18000	-	No Variance
Depreciation- Machinery	11500	11500	-	No variance
Supervisory Sales	15500	18500	3000	Unfavorable
Total Fixed Costs	45000	48000	3000	Unfavorable
Total Overhead Costs	101250	102565	1315	Unfavorable