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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 10,000units (80% of its production capacity of 12,500 units) and preparedthe following overhead budget:Operating LevelsOverhead Budget80%Production in units10,000Standard direct labor hours20,000Budgeted overheadVariable overhead costsIndirect materials$15,000Indirect labor20,000Power5,000Maintenance2,000Total variable costs42,000Fixed overhead costsRent of factory building15,000Depreciation—Machinery11,200Supervisory salaries9,800Total fixed costs36,000Total overhead costs$78,000During May, the company operated at 90% capacity (11,250 units) andincurred the following actual overhead costs:Overhead costs (actual)Indirect materials$15,000Indirect labor22,400Power5,625Maintenance3,050Rent of factory building15,000Depreciation—Machinery11,200Supervisory salaries12,500Total actual overhead costs$84,7751. Compute the overhead controllable variance andclassify it as favorable or unfavorable.2. Compute the overhead volume variance andclassify it as favorable or unfavorable.3. Prepare an overhead variance report at theactual activity level of 11,250 units.