Lance Prating is the controller of the Colchester manufacturing facility of Tech Systems Incorporated. Among the many reports that must be filed with corporate headquarters is the annual overhead performance report. The report covers the year that ends on December 31 and is due at corporate headquarters shortly after the beginning of the New Year. Prating does not like putting work off until the last minute, so just before Christmas, he put together a preliminary draft of the overhead performance report. Some adjustments would later be required for the few transactions that occur between Christmas and New Year€™s Day. A copy of the preliminary draft report, which Prating completed on December 21, is shown below:

Tab Kapp, the general manager at the Colchester facility, asked to see a copy of the preliminary draft report at 4:45 P.M. on December 23. Prating carried a copy of the report to Kapp€™s office, where the following discussion took place:
Required:
What should Lance Prating do? Explain.

COLCHESTER MANUFACTURING FACILITY Overhead Performance Report December 21 Preliminary Draft 100,000 90,000 Budgeted machine-hours... Actual machine-hours. Flexible Budget Based on Actual Costs for Spending Cost Formula (per 90,000 Machine- hour) 90,000 Machine- or Machine- Budget Variance Overhead Costs Hours Hours Variable overhead costs: $ 140 U $ 2840 79,060 32,580 114,480 $ 2,700 TIA00 30,600 Power.. $003 Supplies Abrasives... 0.86 1,660 U 0.34 1,980 U 3,780 U $123 110,700 Fixed overhead costs: Depreciation... Supervisory salaries.. Insurance.... 1,800 U 1,700 F 228,300 187,300 23,000 154,000 46,000 638600 $753,080 226,500 189,000 23,000 160,000 46,000 644,500 $755,200 Industrial engineering. Factory building lease. Total fixed overhead cost. Total overhead cost.. 6,000 F 5,900 F $ 2,120 F