Answered: Rumington Popcorn uses a standard cost…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 5EA: Rose Company has a relevant range of production between 10,000 and 25.000 units. The following cost...

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Question

Rumington Popcorn uses a standard cost system and applies overhead on a per unit basis. The company estimated that 40,000 units would be produced in 2020 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 39,000. How much is the overhead volume variance for 2020?

		$3,250 unfavorable
		$3,850 unfavorable
		$4,000 unfavorable
		$3,000 unfavorable
		$2,700 unfavorable

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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