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James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 10,000 units (80% of its production capacity of 12,500 units) and prepared the following overhead budget:

	Operating Levels
Overhead Budget	80%
Production in units		10,000
Standard direct labor hours		36,000
Budgeted overhead
Variable overhead costs
Indirect materials	$	21,600
Indirect labor		36,000
Power		7,200
Maintenance		3,600
Total variable costs		68,400
Fixed overhead costs
Rent of factory building		20,000
DepreciationMachinery		11,700
Supervisory salaries		29,500
Total fixed costs		61,200
Total overhead costs	$	129,600

During May, the company operated at 90% capacity (11,250 units) and incurred the following actual overhead costs:

Overhead Costs
Indirect materials	$	21,600
Indirect labor		40,150
Power		8,100
Maintenance		4,875
Rent of factory building		20,000
DepreciationMachinery		11,700
Supervisory salaries		32,700
Total actual overhead costs	$	139,125

1. Compute the overhead volume variance. 2. Prepare an overhead variance report at the actual activity level of 11,250 units.

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