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