Blaze Corp applies overhead on the basis of direct labor
Blaze Corp. applies overhead on the basis of direct labor hours. For the month of March, the company planned production of 8,000 units (80% of its production capacity of 10,000 units) and prepared the following budget:
During March, the company operated at 90% capacity (9,000 units), and it incurred the following actual overhead costs:
Overhead costs
Indirect materials. . . . . . . . . . . . . . . . . . . . . . . . . . $10,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000
Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Rent of factory building . . . . . . . . . . . . . . . . . . . . . 12,000
Depreciation—machinery . . . . . . . . . . . . . . . . . . . 19,200
Taxes and insurance. . . . . . . . . . . . . . . . . . . . . . . . 3,000
Supervisory salaries . . . . . . . . . . . . . . . . . . . . . . . . 14,000
Total actual overhead costs. . . . . . . . . . . . . . . . . . .$81,700
1. Compute the overhead controllable variance.
2. Compute the overhead volume variance.
3. Prepare an overhead variance report at the actual activity level of 9,000 units
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