Question

James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 8,000 units (80% of its production capacity of 10,000 units) and prepared the following overhead budget:
During May, the company operated at 90% capacity (9,000 units) and incurred the following actual overhead costs:
Overhead costs
Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . $15,000
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,500
Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,750
Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Rent of factory building . . . . . . . . . . . . . . . . . . . . 15,000
Depreciation—machinery . . . . . . . . . . . . . . . . . . 10,000
Supervisory salaries . . . . . . . . . . . . . . . . . . . . . . . 22,000
Total actual overhead costs . . . . . . . . . . . . . . . . . . $99,250
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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  • CreatedApril 23, 2015
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