Rumington Popcorn Uses a Standard Cost System and Applies Overhead

question 47

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 2017 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 overhead volume variance for 2017?

• A)$2,000 favorable
• B)$28,000 unfavorable
• C)$8,000 favorable
• D)$28,000 favorable

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Definitions:

Goodwill

Goodwill represents the excess of the purchase price paid for an acquired company over the fair value of its identifiable net assets at the time of acquisition.

Equity Method

An accounting technique used to record investments in which the investor has significant influence over the investee, recognizing their share of the profits and losses.

Indefinite Useful Life

An intangible asset with an expected life that extends beyond the foreseeable future, not requiring amortization but subject to annual impairment tests.

Acquisition Differential

The difference between the purchase price of an acquired entity and the fair value of its identifiable net assets.