For May, Mariana Company planned production of 8,000 units (80% of its production capacity of 10,000 units) and prepared the following overhead budget. The company applies overhead with a standard of 3 DLH per unit and a standard overhead rate of $3.85 per DLH.

It actually operated at 90% capacity (9,000 units) in May and incurred the following actual overhead.

1. Compute the overhead controllable variance and identify it as favorable or unfavorable.
2. Compute the overhead volume variance and identify it as favorable or unfavorable.
3. Prepare an overhead variance report at the actual activity level of 9,000 units.

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Overhead Budget 80% Operating Level Production (in units).. 8,000 Budgeted overhead Variable overhead costs Indirect materials..... Indirect labor... $15,000 24,000 Power... 6,000 Maintenance .... 3,000 48,000 Total variable overhead costs .. Fixed overhead costs Rent of building... Depreciation-Machinery. Supervisory salaries .. 15,000 10,000 19,400 Total fixed overhead costs 44,400 $92,400 .... Total overhead ......