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 controllable overhead variance for 2017?
A)$20,000 favorable
B)$20,000 unfavorable
C)$28,000 favorable
D)$28,000 unfavorable

Question

Quizplus · Accepted Answer

The controllable overhead variance is calculated as the difference between the actual overhead costs and the budgeted (or standard) overhead costs for the actual level of activity. The budgeted overhead costs for the actual production level (32,000 units) can be calculated using the given cost formula: Overhead = $120,000 + ($6 per unit * 32,000 units) = $120,000 + $192,000 = $312,000. The actual overhead cost was $340,000. Therefore, the controllable overhead variance is $340,000 - $312,000 = $28,000 unfavorable.

Rumington Popcorn Uses a Standard Cost System and Applies Overhead