Rumington Popcorn Uses a Standard Cost System and Applies Overhead

question 78

Multiple Choice

Rumington Popcorn uses a standard cost system and applies overhead on a per unit basis. The company estimated that 30,000 units would be produced in 2014 and uses this quantity to establish its standard overhead cost per unit. The cost formula for overhead costs used to develop the standard overhead cost per unit was:
Overhead = $120,000 + $6 per unit
During the year, actual overhead cost was $340,000. Actual units produced were 32,000. How much is the controllable overhead variance for 2014?

• A) $20,000 favorable
• B) $20,000 unfavorable
• C) $28,000 favorable
• D) $28,000 unfavorable

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Definitions:

Deposit

A sum of money placed or kept in a bank account, usually to gain interest.

Future Value

The amount of money an investment is expected to grow to over a period at a specified rate of interest or return.

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Mathematical factors used to calculate the future or present value of cash flows based on an interest rate.