STANDARD COSTS AND VARIANCE ANALYSIS STANDARD COSTS AND VARIANCE ANALYSIS
THEORIES: THEORIES:
Standard cost system Standard cost system
1.
1. A primary purA primary purpose of usipose of using a standard cong a standard cost systest system ism is A.
A. To make things easTo make things easier for managerier for managers in the production facs in the production facility.ility. B.
B. To providTo provide a distinct me a distinct measure of coseasure of cost controlt control.. C.
C. To miniTo minimize the cmize the cost per uniost per unit of product of production.tion. D.
D. b and c ab and c are core correcrrectt 2.
2. Which one of the folloWhich one of the following statwing statements is true concements is true concerning stanerning standarddard costs?
costs? A.
A. StandarStandard costs are estimd costs are estimates of costates of costs attainabs attainable only under thele only under the most ideal conditions, but rarely practicable.
most ideal conditions, but rarely practicable. B.
B. StandarStandard costs are difficult to use with a process-cd costs are difficult to use with a process-costinosting system.g system. C.
C. If properlIf properly used, standay used, standards can help motivards can help motivate employete employees.es. D.
D. UnUnfafavovorarablble e vavaririananceces, s, mamateteririal al in in amamouountnt, , shshouould ld bebe in
inveveststigigatated, ed, but but lalargrge e favfavororabable le vavaririanances ces neeneed d nonot t bebe investigated.
investigated. 3.
3. Which of the folWhich of the followilowing is a purposng is a purpose of standard coe of standard costing?sting? A.
A. DetermDetermine “breaine “breakeven” pkeven” productiroduction levelon level B.
B. ConControl trol coscoststs C.
C. ElimiEliminate the need for subjecnate the need for subjective decistive decisions by manageions by managementment D.
D. AllocAllocate cost wate cost with more acith more accuracycuracy 4.
4. WhWhen en evevalaluauatiting ng ththe e opopereratiating ng perperfoformrmanance ce mamanagnagemementent som
sometietimes mes useuses s the the diffdifferenerence ce betwbetween een expexpecteected d and and actactualual performance. This refers to:
performance. This refers to: A.
A. MaMananagegemement nt by by DeDeviviatatioionn C.C. MaMananagegemement nt by by ObObjejectctivivee B.
B. ManManageagement by Cment by Controntrolol D.D. ManagemManagement ent by Exby Exceptioceptionn Standard setting
Standard setting 5.
5. The best basiThe best basis upon whics upon which cost standah cost standards shoulrds should be set to measured be set to measure controllable production inefficiencies is
controllable production inefficiencies is A.
A. EngineEngineering standering standards based on ideal perards based on ideal performancformancee B.
B. NorNormal mal capcapaciacityty C.
C. EngineEngineering standaering standards based on attainablrds based on attainable performance performancee
D.
D. PraPracticctical al capacapacitcityy 6.
6. A company empA company employing verloying very tight (high) sty tight (high) standards in a staandards in a standard costndard cost system should expect that
system should expect that A.
A. No incNo incentive bentive bonus wonus will be ill be paid.paid. B.
B. Most vaMost variances riances will bwill be unfavore unfavorable.able. C.
C. EmployEmployees will be stroees will be strongly motivngly motivated to attain the standated to attain the standard.ard. D.
D. Costs wiCosts will be controlled better than if lower stanll be controlled better than if lower standards were used.dards were used. 7.
7. To To meameasursure e concontroltrollablable le proproductduction ineffiion inefficieciencincies, which es, which of of thethe following is the best basis for a company to use in establishing the following is the best basis for a company to use in establishing the standard hours allowed for the output of one unit of product? standard hours allowed for the output of one unit of product? A.
A. AveragAverage historice historical performaal performance for the last severance for the last several yearsl years B.
B. EngineEngineering estimering estimates based on ideal perates based on ideal performancformancee C.
C. EngineEngineering estimering estimates based on attainablates based on attainable performancee performance D.
D. ThThe e hohours per urs per ununit it thathat t wowoululd d be be reqrequiuirered d for the for the prpresesenentt workforce to satisfy expected demand over the long run
workforce to satisfy expected demand over the long run 8.
8. Which of the follWhich of the following stowing statements abatements about the selectout the selection of standarion of standardsds is true?
is true? A.
A. Ideal staIdeal standards tend to extrandards tend to extract higher perforct higher performance levelmance levels sinces since they give employees something to live up to.
they give employees something to live up to. B.
B. CuCurrerrentlntly y attattaiainanablble e ststandandarards ds mamay y encencouourarage ge opoperaeratitingng inefficiencies.
inefficiencies. C.
C. CurCurrenrently tly attattainainablable e stastandarndards ds disdiscoucouragrage e emplemployeoyees es fromfrom achieving their full performance potential.
achieving their full performance potential. D.
D. Ideal standIdeal standards demand maximards demand maximum efficiencum efficiency which may leavey which may leave workers frustrated, thus causing a decline in performance. workers frustrated, thus causing a decline in performance. Standard costs vs. budgeted costs
Standard costs vs. budgeted costs 9.
9. A differencA difference between stane between standard costs usedard costs used for cost control and thed for cost control and the budgeted costs representi
budgeted costs representing ng the same the same manufacmanufacturing effort turing effort cancan exist because
exist because A.
A. ststanandadard rd cocoststs s mumust st be be dedetetermrminined ed afafteter r ththe e bubudgdget et isis completed
completed B.
B. standastandard costs represrd costs represent what costent what costs should be whils should be while budgetede budgeted costs represent expected actual costs
costs represent expected actual costs C.
C. budgbudgeted costs are eted costs are hishistortoricaical l coscosts ts whiwhile le stastandandard rd coscosts ts areare 203
203
Standard Costs and Variance Analysis Standard Costs and Variance Analysis based on engineering studies
based on engineering studies D.
D. bubudgedgeted ted cocoststs s ininclcludude e sosome me “s“slalackck” ” or or “p“padaddidingng” ” whwhililee standard costs do not
standard costs do not Process costing
Process costing
10.When standard costs are used in a process-costing system, how, if 10.When standard costs are used in a process-costing system, how, if at all, are equivalent units involved or used in the cost report at at all, are equivalent units involved or used in the cost report at standard?
standard? A.
A. EquivaEquivalent unlent units aits are not re not used.used. B.
B. EquivaEquivalent units are comlent units are computed using a “speputed using a “special” apprcial” approach.oach. C.
C. The actual equiThe actual equivalent unitvalent units are multiplis are multiplied by the standard costed by the standard cost per unit.
per unit. D.
D. The standarThe standard equivalend equivalent units are multiplt units are multiplied by the actual costied by the actual cost per unit.
per unit. Normal costing Normal costing
11.The fixed overhead application rate is a function of a predetermined 11.The fixed overhead application rate is a function of a predetermined
“norma
“normal” activity level” activity level. l. If standard hours allIf standard hours allowed for good outputowed for good output equa
equal l thithis s predpredetereterminmined ed actactiviivity ty levlevel el for for a a givgiven en perperiodiod, , thethe volume variance will be
volume variance will be A
A.. ZZe re roo B.
B. FaFavovorabrablele C.
C. UnUnfafavovorarableble D.
D. EitEither favoraher favorable or ble or unfunfavoavorablrable, e, depedependinding ng on on the budgetethe budgetedd overhead.
overhead.
Types of standards Types of standards
12.The absolute minimum cost possible under the best conceivable 12.The absolute minimum cost possible under the best conceivable
operating conditions is a description of which type of standard? operating conditions is a description of which type of standard? A.
A. CurrenCurrently atly attainabttainable (ele (expected)xpected) CC.. TThhe oe orreet it iccaall B
B. N. Noorrmmaall DD.. PPrraaccttiiccaall
13.Standards, which are difficult to achieve due to reasons beyond the 13.Standards, which are difficult to achieve due to reasons beyond the individual performing the task, are the result of firm using which of individual performing the task, are the result of firm using which of the following methods to establish standards?
the following methods to establish standards? A.
A. IdeIdeal al StanStandarddardss C.C. PraPractictical Stancal Standardardsds B
B.. LLaax x SSttaannddaarrddss DD.. EEmmppllooyyeee e SSttaannddaarrddss
14.Standards that represent levels of operation that can be attained 14.Standards that represent levels of operation that can be attained
with reasonable effort are called: with reasonable effort are called: A
A.. TThheeoorreettiiccaal l ssttaannddaarrddss CC.. VVaarriiaabblle e ssttaannddaarrddss B.
B. IdeIdeal al stastandandardsrds D.D. NorNormal stamal standarndardsds
Variances Variances
Generic variances Generic variances 15
15.Whe.When n perfperformorming ing inpinput/ut/outoutput put varivariancance e analanalysiysis s in in stastandandardrd costing, “standard hours allowed” is a means of measuring
costing, “standard hours allowed” is a means of measuring A.
A. StandarStandard outpud output at st at standard tandard hourshours CC.. AAccttuuaal l oouuttppuut t aatt standard hours
standard hours B.
B. StStanandadard rd ououtptput ut at at acactutual al hohoururss D.D. AcActutual al ououtptput ut at at acactutualal hours
hours Two way variances Two way variances
Volume variance Volume variance 16
16.A .A comcompany pany useuses s a a twotwo-wa-way y analanalysiysis s for for oveoverhearhead d varivarianceances:s: budget (controllable) and volume.
budget (controllable) and volume. The volume variance is The volume variance is based onbased on the
the A.
A. Total Total overheaoverhead appld applicatioication raten rate B.
B. VolumVolume of total expense of total expenses at various aes at various activitctivity levelsy levels C.
C. VariaVariable overhble overhead appliead application rcation rateate D.
D. Fixed oFixed overhead averhead applicapplication ratetion rate
17.Assuming that the standard fixed overhead rate is based on full 17.Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is capacity, the cost of available but unused productive capacity is indicated by the:
indicated by the: A.
A. FactoFactory overheary overhead cost vold cost volume variume varianceance B.
B. DirecDirect labor cot labor cost efficist efficiency variency varianceance C.
C. DirecDirect labor ct labor cost ratost rate variae variancence D.
D. FactoFactory overhead cost conry overhead cost controllatrollable variancble variancee 18
18.In .In analanalyziyzing ng manmanufaufacturcturing ing overoverheahead d varvarianiancesces, , the the volvolumeume variance is the difference between the:
variance is the difference between the: A.
A. Amount shAmount shown in the flexibown in the flexible budget and the amole budget and the amount shown inunt shown in the debit side of the overhead control account
the debit side of the overhead control account B.
B. PredetePredetermined overrmined overhead applichead application rate and the flexiblation rate and the flexible budgete budget application rate times actual hours worked
application rate times actual hours worked 204
204
Standard Costs and Variance Analysis C. Budget allowance based on standard hours allowed for actual
production for the period and the amount budgeted to be applied during the period
D. Actual amount spent for overhead items during the period and the overhead amount applied to production during the period 19.The variance least significant for purposes of controlling costs is
the:
A. Material usage variance
B. Variable overhead efficiency variance C. Fixed overhead spending variance D. Fixed overhead volume variance
20.The variance most useful in evaluating plant utilization is the: A. Variable overhead spending variance
B. Fixed overhead spending variance. C. Variable overhead efficiency variance D. Fixed overhead volume variance Four way variances
21.The choice of production volume as a denominator for calculating its factory overhead rate
A. Has no effect on the fixed factory overhead rate for applying costs to production
B. Has an effect on the variable factory overhead rate for applying costs to production
C. Has no effect on the fixed factory overhead budget variance D. Has no effect on the fixed factory overhead production volume
variance
23.Which department is customarily held responsible for an unfavorable materials usage variance?
A. Quality control C. Purchasing
B. Engineering D. Production
Variance analysis
24.Which of the following should be least considered when deciding whether to investigate a variance?
A. Whether the variance is favorable or unfavorable B. Significance of the variance
C. Cost of investigating the variance D. Trend of the variances over time Total materials variance
25.If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to price and usage?
A. There is no need to further evaluate the total materials variance if it is favorable
B. Generally accepted accounting principles require that all variances be analyzed in three stages
C. All variances must appear in the annual report to equity owners for proper disclosure
D. To allow management to evaluate the efficiency of the purchasing and production functions
Labor variances
based on engineering studies based on engineering studies D.
D. bubudgedgeted ted cocoststs s ininclcludude e sosome me “s“slalackck” ” or or “p“padaddidingng” ” whwhililee standard costs do not
standard costs do not Process costing
Process costing
10.When standard costs are used in a process-costing system, how, if 10.When standard costs are used in a process-costing system, how, if at all, are equivalent units involved or used in the cost report at at all, are equivalent units involved or used in the cost report at standard?
standard? A.
A. EquivaEquivalent unlent units aits are not re not used.used. B.
B. EquivaEquivalent units are comlent units are computed using a “speputed using a “special” apprcial” approach.oach. C.
C. The actual equiThe actual equivalent unitvalent units are multiplis are multiplied by the standard costed by the standard cost per unit.
per unit. D.
D. The standarThe standard equivalend equivalent units are multiplt units are multiplied by the actual costied by the actual cost per unit.
per unit. Normal costing Normal costing
11.The fixed overhead application rate is a function of a predetermined 11.The fixed overhead application rate is a function of a predetermined
“norma
“normal” activity level” activity level. l. If standard hours allIf standard hours allowed for good outputowed for good output equa
equal l thithis s predpredetereterminmined ed actactiviivity ty levlevel el for for a a givgiven en perperiodiod, , thethe volume variance will be
volume variance will be A
A.. ZZe re roo B.
B. FaFavovorabrablele C.
C. UnUnfafavovorarableble D.
D. EitEither favoraher favorable or ble or unfunfavoavorablrable, e, depedependinding ng on on the budgetethe budgetedd overhead.
overhead.
Types of standards Types of standards
12.The absolute minimum cost possible under the best conceivable 12.The absolute minimum cost possible under the best conceivable
operating conditions is a description of which type of standard? operating conditions is a description of which type of standard? A.
A. CurrenCurrently atly attainabttainable (ele (expected)xpected) CC.. TThhe oe orreet it iccaall B
B. N. Noorrmmaall DD.. PPrraaccttiiccaall
13.Standards, which are difficult to achieve due to reasons beyond the 13.Standards, which are difficult to achieve due to reasons beyond the individual performing the task, are the result of firm using which of individual performing the task, are the result of firm using which of the following methods to establish standards?
the following methods to establish standards? A.
A. IdeIdeal al StanStandarddardss C.C. PraPractictical Stancal Standardardsds B
B.. LLaax x SSttaannddaarrddss DD.. EEmmppllooyyeee e SSttaannddaarrddss
14.Standards that represent levels of operation that can be attained 14.Standards that represent levels of operation that can be attained
with reasonable effort are called: with reasonable effort are called: A
A.. TThheeoorreettiiccaal l ssttaannddaarrddss CC.. VVaarriiaabblle e ssttaannddaarrddss B.
B. IdeIdeal al stastandandardsrds D.D. NorNormal stamal standarndardsds
Variances Variances
Generic variances Generic variances 15
15.Whe.When n perfperformorming ing inpinput/ut/outoutput put varivariancance e analanalysiysis s in in stastandandardrd costing, “standard hours allowed” is a means of measuring
costing, “standard hours allowed” is a means of measuring A.
A. StandarStandard outpud output at st at standard tandard hourshours CC.. AAccttuuaal l oouuttppuut t aatt standard hours
standard hours B.
B. StStanandadard rd ououtptput ut at at acactutual al hohoururss D.D. AcActutual al ououtptput ut at at acactutualal hours
hours Two way variances Two way variances
Volume variance Volume variance 16
16.A .A comcompany pany useuses s a a twotwo-wa-way y analanalysiysis s for for oveoverhearhead d varivarianceances:s: budget (controllable) and volume.
budget (controllable) and volume. The volume variance is The volume variance is based onbased on the
the A.
A. Total Total overheaoverhead appld applicatioication raten rate B.
B. VolumVolume of total expense of total expenses at various aes at various activitctivity levelsy levels C.
C. VariaVariable overhble overhead appliead application rcation rateate D.
D. Fixed oFixed overhead averhead applicapplication ratetion rate
17.Assuming that the standard fixed overhead rate is based on full 17.Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is capacity, the cost of available but unused productive capacity is indicated by the:
indicated by the: A.
A. FactoFactory overheary overhead cost vold cost volume variume varianceance B.
B. DirecDirect labor cot labor cost efficist efficiency variency varianceance C.
C. DirecDirect labor ct labor cost ratost rate variae variancence D.
D. FactoFactory overhead cost conry overhead cost controllatrollable variancble variancee 18
18.In .In analanalyziyzing ng manmanufaufacturcturing ing overoverheahead d varvarianiancesces, , the the volvolumeume variance is the difference between the:
variance is the difference between the: A.
A. Amount shAmount shown in the flexibown in the flexible budget and the amole budget and the amount shown inunt shown in the debit side of the overhead control account
the debit side of the overhead control account B.
B. PredetePredetermined overrmined overhead applichead application rate and the flexiblation rate and the flexible budgete budget application rate times actual hours worked
application rate times actual hours worked 204
204
Standard Costs and Variance Analysis C. Budget allowance based on standard hours allowed for actual
production for the period and the amount budgeted to be applied during the period
D. Actual amount spent for overhead items during the period and the overhead amount applied to production during the period 19.The variance least significant for purposes of controlling costs is
the:
A. Material usage variance
B. Variable overhead efficiency variance C. Fixed overhead spending variance D. Fixed overhead volume variance
20.The variance most useful in evaluating plant utilization is the: A. Variable overhead spending variance
B. Fixed overhead spending variance. C. Variable overhead efficiency variance D. Fixed overhead volume variance Four way variances
21.The choice of production volume as a denominator for calculating its factory overhead rate
A. Has no effect on the fixed factory overhead rate for applying costs to production
B. Has an effect on the variable factory overhead rate for applying costs to production
C. Has no effect on the fixed factory overhead budget variance D. Has no effect on the fixed factory overhead production volume
variance
22.The budgeted overhead costs for standard hours allowed and the overhead costs applied to product are the same amount
A. for both variable and fixed overhead costs.
B. only when standard hours allowed is less than normal capacity. C. for variable overhead costs.
D. for fixed overhead costs. Responsibility for variances
23.Which department is customarily held responsible for an unfavorable materials usage variance?
A. Quality control C. Purchasing
B. Engineering D. Production
Variance analysis
24.Which of the following should be least considered when deciding whether to investigate a variance?
A. Whether the variance is favorable or unfavorable B. Significance of the variance
C. Cost of investigating the variance D. Trend of the variances over time Total materials variance
25.If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to price and usage?
A. There is no need to further evaluate the total materials variance if it is favorable
B. Generally accepted accounting principles require that all variances be analyzed in three stages
C. All variances must appear in the annual report to equity owners for proper disclosure
D. To allow management to evaluate the efficiency of the purchasing and production functions
Labor variances
26.Which of the following unfavorable cost variances would be directly affected by the relative position of a production process on a learning curve?
A. Materials mix C. Labor rate
B. Materials price D. Labor efficiency
27.Which of the following is the most probable reason with a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?
A. The mix of workers assigned to the particular job was heavily 205
Standard Costs and Variance Analysis weighted toward the use of higherly paid, experienced
individuals.
B. The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low paid, unskilled workers.
C. Because of the productive schedule, workers from other production areas were assigned to assist in this particular process.
D. Defective materials caused more labor to be used in order to produce a standard unit.
Two-way overhead variance
28.The budget for a given cost during a given period was P1,600,000. The actual cost for the period was P1,440,000. Considering these facts, it can be said that the plant manager has done a better than expected job in controlling the cost if:
A. The cost is variable and actual production was 90% of budgeted production
B. The cost is variable and actual production equaled budgeted production
C. The cost is variable and actual production was 80% of budgeted production
D. The cost is discretionary fixed cost and actual production equaled budgeted production
Budget variance
29.The budget variance for fixed factory overhead for the normal-volume, practical-capacity, and expected-activity levels would be the:
based on 5,000 gallon capacity. Therefore, the cost of storing 4,000 gallons was P1,000 more (P.25 x 4,000) in total than if you had stored 5,000 gallons of liquid in the tank. Which variance is being described?
A. Variable-overhead efficiency variance B. Fixed-overhead spending variance C. Variable-overhead spending variance D. Fixed-overhead volume variance
31.Favorable fixed overhead volume variance occurs if: A. There is a favorable labor efficiency variance B. There is a favorable labor rate variance C. Production is less than planned
D. Production is greater than planned
32.The unfavorable volume variance may be due to all but which of the following factors?
A. Failure to maintain an even flow of work B. Machine breakdowns
C. Unexpected increases in the cost of utilities D. Failure to obtain enough sales orders
33.How will a favorable volume variance affect net income under each of the following methods?
Absorpt ion Variabl e A. Decrea se No eff ect
C. Budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period
D. Actual amount spent for overhead items during the period and the overhead amount applied to production during the period 19.The variance least significant for purposes of controlling costs is
the:
A. Material usage variance
B. Variable overhead efficiency variance C. Fixed overhead spending variance D. Fixed overhead volume variance
20.The variance most useful in evaluating plant utilization is the: A. Variable overhead spending variance
B. Fixed overhead spending variance. C. Variable overhead efficiency variance D. Fixed overhead volume variance Four way variances
21.The choice of production volume as a denominator for calculating its factory overhead rate
A. Has no effect on the fixed factory overhead rate for applying costs to production
B. Has an effect on the variable factory overhead rate for applying costs to production
C. Has no effect on the fixed factory overhead budget variance D. Has no effect on the fixed factory overhead production volume
variance
22.The budgeted overhead costs for standard hours allowed and the overhead costs applied to product are the same amount
A. for both variable and fixed overhead costs.
B. only when standard hours allowed is less than normal capacity. C. for variable overhead costs.
D. for fixed overhead costs. Responsibility for variances
23.Which department is customarily held responsible for an unfavorable materials usage variance?
A. Quality control C. Purchasing
B. Engineering D. Production
Variance analysis
24.Which of the following should be least considered when deciding whether to investigate a variance?
A. Whether the variance is favorable or unfavorable B. Significance of the variance
C. Cost of investigating the variance D. Trend of the variances over time Total materials variance
25.If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to price and usage?
A. There is no need to further evaluate the total materials variance if it is favorable
B. Generally accepted accounting principles require that all variances be analyzed in three stages
C. All variances must appear in the annual report to equity owners for proper disclosure
D. To allow management to evaluate the efficiency of the purchasing and production functions
Labor variances
26.Which of the following unfavorable cost variances would be directly affected by the relative position of a production process on a learning curve?
A. Materials mix C. Labor rate
B. Materials price D. Labor efficiency
27.Which of the following is the most probable reason with a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?
A. The mix of workers assigned to the particular job was heavily 205
Standard Costs and Variance Analysis weighted toward the use of higherly paid, experienced
individuals.
B. The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low paid, unskilled workers.
C. Because of the productive schedule, workers from other production areas were assigned to assist in this particular process.
D. Defective materials caused more labor to be used in order to produce a standard unit.
Two-way overhead variance
28.The budget for a given cost during a given period was P1,600,000. The actual cost for the period was P1,440,000. Considering these facts, it can be said that the plant manager has done a better than expected job in controlling the cost if:
A. The cost is variable and actual production was 90% of budgeted production
B. The cost is variable and actual production equaled budgeted production
C. The cost is variable and actual production was 80% of budgeted production
D. The cost is discretionary fixed cost and actual production equaled budgeted production
Budget variance
29.The budget variance for fixed factory overhead for the normal-volume, practical-capacity, and expected-activity levels would be the:
A. Same except for normal volume C. Same except for expected activity
B. Same except for practical capacity D. Same for all three activity levels
Volume variance
30.You have leased a 5,000-gallon storage tank for P5,000 per month. You stored 4,000 gallons of liquid in the tan k during the month. The cost of storage was P1.25 per gallon, rather than P1.00 per gallon
based on 5,000 gallon capacity. Therefore, the cost of storing 4,000 gallons was P1,000 more (P.25 x 4,000) in total than if you had stored 5,000 gallons of liquid in the tank. Which variance is being described?
A. Variable-overhead efficiency variance B. Fixed-overhead spending variance C. Variable-overhead spending variance D. Fixed-overhead volume variance
31.Favorable fixed overhead volume variance occurs if: A. There is a favorable labor efficiency variance B. There is a favorable labor rate variance C. Production is less than planned
D. Production is greater than planned
32.The unfavorable volume variance may be due to all but which of the following factors?
A. Failure to maintain an even flow of work B. Machine breakdowns
C. Unexpected increases in the cost of utilities D. Failure to obtain enough sales orders
33.How will a favorable volume variance affect net income under each of the following methods?
Absorpt ion Variabl e A. Decrea se No eff ect B. Decrea se Increa se C. Increas e No eff ect D. Increas e Decre ase
34.Favorable volume variances may be harmful when: 206
Standard Costs and Variance Analysis A. Machine repairs cause work stoppages
B. Supervisors fail to maintain an even flow of work C. Production in excess of normal capacity cannot be sold
D. There are insufficient sales orders to keep the factory operating at normal capacity
Three-way Overhead variance
35.During 2006, a department’s three-variance overhead standard costing system reported unfavorable spending and volume variances. The activity level selected for allocating overhead to the product was based on 80% of practical capacity. It 100% of practical capacity had been selected instead, how would the reported unfavorable spending and volume variances be affected?
Spending Variance Volume Variance A. Increased Unchanged B. Increased Increased C. Unchanged Increased D. Unchanged Unchanged PROBLEMS: Standard setting Raw Materials
i. Shampoo Company is a chemical manufacturer that supplies industrial users. The company plans to introduce a new chemical solution and needs to develop a standard product cost for this new solution.
The purchase prices of the raw materials used in the manufacture of this new chemical solution are as follows:
Nyclyn P15.00 per kilogram
Salex P21.00perliter
Protet P28.00 per kilogram
The total standard materials cost of 20 liters of the product is:
A. P1,043.20 C. P 834.56
B. P1,304.00 D. P1,234.00
ii. El Andre Co. uses a standard costing system in connection with the manufacture of a line of T-shirts. Each unit of finished product contains 2.25 yards of direct material. However, a 25 percent direct material spoilage calculated on input quantities occurs during the manufacturing process. The cost of the direct materials is P150 per yard. The standard direct material cost per unit of finished product is
A. P 253 C. P 450
B. P 422 D. P 405
iii. Each finished unit of Product EM contains 60 pounds of raw material. The manufacturing process must provide for a 20% waste allowance. The raw material can be purchased for P2.50 a pound under terms of 2/10, n/30. The company takes all cash discounts. The standard direct material cost for each unit of EM is:
A. P180.00 C. P187.50
B. P183.75 D. P176.40
iv. The Vandana Company has a signature scarf for ladies that is very popular. Certain production and marketing data are indicated
weighted toward the use of higherly paid, experienced individuals.
B. The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low paid, unskilled workers.
C. Because of the productive schedule, workers from other production areas were assigned to assist in this particular process.
D. Defective materials caused more labor to be used in order to produce a standard unit.
Two-way overhead variance
28.The budget for a given cost during a given period was P1,600,000. The actual cost for the period was P1,440,000. Considering these facts, it can be said that the plant manager has done a better than expected job in controlling the cost if:
A. The cost is variable and actual production was 90% of budgeted production
B. The cost is variable and actual production equaled budgeted production
C. The cost is variable and actual production was 80% of budgeted production
D. The cost is discretionary fixed cost and actual production equaled budgeted production
Budget variance
29.The budget variance for fixed factory overhead for the normal-volume, practical-capacity, and expected-activity levels would be the:
A. Same except for normal volume C. Same except for expected activity
B. Same except for practical capacity D. Same for all three activity levels
Volume variance
30.You have leased a 5,000-gallon storage tank for P5,000 per month. You stored 4,000 gallons of liquid in the tan k during the month. The cost of storage was P1.25 per gallon, rather than P1.00 per gallon
based on 5,000 gallon capacity. Therefore, the cost of storing 4,000 gallons was P1,000 more (P.25 x 4,000) in total than if you had stored 5,000 gallons of liquid in the tank. Which variance is being described?
A. Variable-overhead efficiency variance B. Fixed-overhead spending variance C. Variable-overhead spending variance D. Fixed-overhead volume variance
31.Favorable fixed overhead volume variance occurs if: A. There is a favorable labor efficiency variance B. There is a favorable labor rate variance C. Production is less than planned
D. Production is greater than planned
32.The unfavorable volume variance may be due to all but which of the following factors?
A. Failure to maintain an even flow of work B. Machine breakdowns
C. Unexpected increases in the cost of utilities D. Failure to obtain enough sales orders
33.How will a favorable volume variance affect net income under each of the following methods?
Absorpt ion Variabl e A. Decrea se No eff ect B. Decrea se Increa se C. Increas e No eff ect D. Increas e Decre ase
34.Favorable volume variances may be harmful when: 206
Standard Costs and Variance Analysis A. Machine repairs cause work stoppages
B. Supervisors fail to maintain an even flow of work C. Production in excess of normal capacity cannot be sold
D. There are insufficient sales orders to keep the factory operating at normal capacity
Three-way Overhead variance
35.During 2006, a department’s three-variance overhead standard costing system reported unfavorable spending and volume variances. The activity level selected for allocating overhead to the product was based on 80% of practical capacity. It 100% of practical capacity had been selected instead, how would the reported unfavorable spending and volume variances be affected?
Spending Variance Volume Variance A. Increased Unchanged B. Increased Increased C. Unchanged Increased D. Unchanged Unchanged PROBLEMS: Standard setting Raw Materials
i. Shampoo Company is a chemical manufacturer that supplies industrial users. The company plans to introduce a new chemical solution and needs to develop a standard product cost for this new solution.
The new chemical solution is made by combining a chemical compound (Nyclyn) and a solution (Salex), boiling the mixture; adding a second compound (Protet), and bottling the resulting solution in 20-liter containers. The initial mix, which is 20 liters in volume, consists of 24 kilograms of Nyclyn and 19.2 liters of Salex. A 20% reduction in volume occurs during the boiling process. The solution is then cooled slightly before 10 kilograms of Protet are added; the addition of Protet does not affect the total liquid volume.
The purchase prices of the raw materials used in the manufacture of this new chemical solution are as follows:
Nyclyn P15.00 per kilogram
Salex P21.00perliter
Protet P28.00 per kilogram
The total standard materials cost of 20 liters of the product is:
A. P1,043.20 C. P 834.56
B. P1,304.00 D. P1,234.00
ii. El Andre Co. uses a standard costing system in connection with the manufacture of a line of T-shirts. Each unit of finished product contains 2.25 yards of direct material. However, a 25 percent direct material spoilage calculated on input quantities occurs during the manufacturing process. The cost of the direct materials is P150 per yard. The standard direct material cost per unit of finished product is
A. P 253 C. P 450
B. P 422 D. P 405
iii. Each finished unit of Product EM contains 60 pounds of raw material. The manufacturing process must provide for a 20% waste allowance. The raw material can be purchased for P2.50 a pound under terms of 2/10, n/30. The company takes all cash discounts. The standard direct material cost for each unit of EM is:
A. P180.00 C. P187.50
B. P183.75 D. P176.40
iv. The Vandana Company has a signature scarf for ladies that is very popular. Certain production and marketing data are indicated below:
Cost per yard of cloth P40.00
Allowance for rejected scarf 5% of production Yards of cloth needed per scarf 0.475 yard
Airfreight from supplier P1.00/yard
Motor freight to customers P0.90 /scarf
Purchase discounts from supplier 3%
Sales discount to customers 2%
The allowance for rejected scarf is not part of the 0.475 yard of 207
Standard Costs and Variance Analysis cloth per scarf. Rejects have no market value. Materials are used
at the start of production.
Calculate the standard cost of cloth per scarf that Vandana Company should use in its cost sheets.
A. P19.85 C. P19.40
B. P20.00 D. P19.90
Direct labor
v. Double M company is a chemical manufacturer that supplies various products to industrial users. The company plans to introduce a new chemical solution called Bysap, for which it needs to develop a standard product cost. The following labor information is available on the production of Bysap.
• The product, which is bottled in 10-liter containers, is
primarily a mixture of Byclyn, Salex, and Protet.
• The finished product is highly unstable, and one 10-liter
batch out of six is rejected at final inspection. Rejected batches have no commercial value and are thrown out.
• It takes a worker 35 minutes to process one 10-liter batch of
Bysap. Employees work on eight-hour a day, including one hour per day for rest breaks and cleanup.
What is the standard labor time to produce one 10-liter batch of Bysap?
A. 35 minutes C. 48 minutes
B. 40 minutes D. 45 minutes
vi. The following direct labor information pertains to the manufacture of Part J35:
Number of hours required to make a part 2 5 DLH
Materials & Labor
Questions Nos. 7 and 8 are based on the following:
Supercold Company is a small producer of fruit-flavored frozen desserts. For many years, Supercold’s products have had strong regional sales on the basis of brand recognition. However, other companies have begun marketing similar products in the area, and price competition has become increasingly important. Haydee Mejia, the company’s controller, is planning to implement a standard costing system for Supercold and has gathered considerable information on production and material requirements for Supercold’s products. Haydee believes that the use of standard costing will allow Supercold to improve cost control and make better pricing decisions.
Supercold’s most popular products is strawberry sherbet. The sherbet is produced in 10-gallon batches, and each batch requires six quarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. Because of imperfections in the strawberries and normal spoilage, one quart of berries is discarded for every four quarts of acceptable berries. Three minutes is the standard direct labor time for sorting that is required to obtain one quart of acceptable berries. The acceptable berries are then blended with the other ingredients; blending requires 12 minutes of direct labor time per batch. After blending, the sherbet is package in quart containers. Haydee has gathered the following information from Rizza Alano, Supercold’s cost accountant.
Supercold purchases strawberries at a cost of P8.00 per quart. All other ingredients cost a total of P4.50 per gallon.
A. Machine repairs cause work stoppages
B. Supervisors fail to maintain an even flow of work C. Production in excess of normal capacity cannot be sold
D. There are insufficient sales orders to keep the factory operating at normal capacity
Three-way Overhead variance
35.During 2006, a department’s three-variance overhead standard costing system reported unfavorable spending and volume variances. The activity level selected for allocating overhead to the product was based on 80% of practical capacity. It 100% of practical capacity had been selected instead, how would the reported unfavorable spending and volume variances be affected?
Spending Variance Volume Variance A. Increased Unchanged B. Increased Increased C. Unchanged Increased D. Unchanged Unchanged PROBLEMS: Standard setting Raw Materials
i. Shampoo Company is a chemical manufacturer that supplies industrial users. The company plans to introduce a new chemical solution and needs to develop a standard product cost for this new solution.
The new chemical solution is made by combining a chemical compound (Nyclyn) and a solution (Salex), boiling the mixture; adding a second compound (Protet), and bottling the resulting solution in 20-liter containers. The initial mix, which is 20 liters in volume, consists of 24 kilograms of Nyclyn and 19.2 liters of Salex. A 20% reduction in volume occurs during the boiling process. The solution is then cooled slightly before 10 kilograms of Protet are added; the addition of Protet does not affect the total liquid volume.
The purchase prices of the raw materials used in the manufacture of this new chemical solution are as follows:
Nyclyn P15.00 per kilogram
Salex P21.00perliter
Protet P28.00 per kilogram
The total standard materials cost of 20 liters of the product is:
A. P1,043.20 C. P 834.56
B. P1,304.00 D. P1,234.00
ii. El Andre Co. uses a standard costing system in connection with the manufacture of a line of T-shirts. Each unit of finished product contains 2.25 yards of direct material. However, a 25 percent direct material spoilage calculated on input quantities occurs during the manufacturing process. The cost of the direct materials is P150 per yard. The standard direct material cost per unit of finished product is
A. P 253 C. P 450
B. P 422 D. P 405
iii. Each finished unit of Product EM contains 60 pounds of raw material. The manufacturing process must provide for a 20% waste allowance. The raw material can be purchased for P2.50 a pound under terms of 2/10, n/30. The company takes all cash discounts. The standard direct material cost for each unit of EM is:
A. P180.00 C. P187.50
B. P183.75 D. P176.40
iv. The Vandana Company has a signature scarf for ladies that is very popular. Certain production and marketing data are indicated below:
Cost per yard of cloth P40.00
Allowance for rejected scarf 5% of production Yards of cloth needed per scarf 0.475 yard
Airfreight from supplier P1.00/yard
Motor freight to customers P0.90 /scarf
Purchase discounts from supplier 3%
Sales discount to customers 2%
The allowance for rejected scarf is not part of the 0.475 yard of 207
Standard Costs and Variance Analysis cloth per scarf. Rejects have no market value. Materials are used
at the start of production.
Calculate the standard cost of cloth per scarf that Vandana Company should use in its cost sheets.
A. P19.85 C. P19.40
B. P20.00 D. P19.90
Direct labor
v. Double M company is a chemical manufacturer that supplies various products to industrial users. The company plans to introduce a new chemical solution called Bysap, for which it needs to develop a standard product cost. The following labor information is available on the production of Bysap.
• The product, which is bottled in 10-liter containers, is
primarily a mixture of Byclyn, Salex, and Protet.
• The finished product is highly unstable, and one 10-liter
batch out of six is rejected at final inspection. Rejected batches have no commercial value and are thrown out.
• It takes a worker 35 minutes to process one 10-liter batch of
Bysap. Employees work on eight-hour a day, including one hour per day for rest breaks and cleanup.
What is the standard labor time to produce one 10-liter batch of Bysap?
A. 35 minutes C. 48 minutes
B. 40 minutes D. 45 minutes
vi. The following direct labor information pertains to the manufacture of Part J35:
Number of hours required to make a part 2.5 DLH
Number of Direct workers 75
Number of total productive hours per week 3000
Weekly wages per worker P1,000
Laborers’ fringe benefits treated as direct labor costs 25% of wages
What is the standard direct labor cost per unit of Part J35?
A. P62.500 C. P41.670
B. P78.125 D. P84.125
Materials & Labor
Questions Nos. 7 and 8 are based on the following:
Supercold Company is a small producer of fruit-flavored frozen desserts. For many years, Supercold’s products have had strong regional sales on the basis of brand recognition. However, other companies have begun marketing similar products in the area, and price competition has become increasingly important. Haydee Mejia, the company’s controller, is planning to implement a standard costing system for Supercold and has gathered considerable information on production and material requirements for Supercold’s products. Haydee believes that the use of standard costing will allow Supercold to improve cost control and make better pricing decisions.
Supercold’s most popular products is strawberry sherbet. The sherbet is produced in 10-gallon batches, and each batch requires six quarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. Because of imperfections in the strawberries and normal spoilage, one quart of berries is discarded for every four quarts of acceptable berries. Three minutes is the standard direct labor time for sorting that is required to obtain one quart of acceptable berries. The acceptable berries are then blended with the other ingredients; blending requires 12 minutes of direct labor time per batch. After blending, the sherbet is package in quart containers. Haydee has gathered the following information from Rizza Alano, Supercold’s cost accountant.
Supercold purchases strawberries at a cost of P8.00 per quart. All other ingredients cost a total of P4.50 per gallon.
Direct labor is paid at the rate of P50 per hour.
The total cost of material an d labor require d to package the sherbet is P3.80 per quart.
Rizza Alano has a friend who owns a berry farm that has been losing money in recent years. Because of good crops, there has been an oversupply of strawberries, and prices have dropped to P5.00 per quart. Rizza has arranged for Supercold to purchase strawberries form her friend and hopes that P8.00 per quart will help her friend’s farm 208
Standard Costs and Variance Analysis become profitable again.
vii. The standard materials cost per 10-gallon batch of strawberry sherbet is:
A. P 85.00 C. P101.00
B. P 60.00 D. P105.00
viii. The standard direct labor cost per 10-gallon batch of sherbet is:
A. P50.00 C. P25.00
B. P28.75 D. P15.00
Materials variance
ix. Under a standard cost system, the materials quantity variance was recorded at P1,970 unfavorable, the materials price variance was recorded at P3,740 favorable, and the Goods in Process was debited for P51,690. Ninety-six thousand units were completed. What was the per unit price of the actual materials used?
A. P0.52 each C. P0.54 eac
B. P0.53 each D. P0.51 each
x. Blake Company has a standard price of P5.50 per pound for materials. July’s results showed an unfavorable material price variance of P44 and a favorable quantity variance of P209. If 1,066 pounds were used in production, what was the standard quantity allowed for materials?
A . 1, 104 C. 1 ,0 66
B. 1,074 D. 1,100
xi. Elite Company uses a standard costing system in the manufacture
xii. Sheridan Company has a standard of 15 parts of component BB costing P1.50 each. Sheridan purchased 14,910 units of component BB for P22,145. Sheridan generated a P220 favorable price variance and a P3,735 favorable quantity variance. If there were no changes in the component inventory, how many units of finished product were produced?
A. 994 units. C. 1,000 units
B. 1,090 units. D. 1,160 units
xiii. The standard usage for raw materials is 5 pounds at P40.00 per pound. Cave Company spent P131,200 in purchasing 3,200 pounds. Cave used 3,150 pounds to produce 600 units of finished product. The material quantity variance is:
A. P6,000 unfavorable C. P3,200 unfavorable B. P5,200 unfavorable D. P2,000 unfavorable
xiv. The Bohol Company uses standard costing. The following data are available for October:
Actual quantity of direct materials used 23,500 pounds Standard price of direct materials P2 per pound
Material quantity variance P1,000 U
The standard quantity of materials allowed f or October production is:
A. 23,000 lbs C. 24,000 lbs
B. 24,500 lbs D. 25,000 lbs
xv. Information on Dulce’s direct material costs for May is as follows: Actual quantity of direct materials purchased and used30,000
cloth per scarf. Rejects have no market value. Materials are used at the start of production.
Calculate the standard cost of cloth per scarf that Vandana Company should use in its cost sheets.
A. P19.85 C. P19.40
B. P20.00 D. P19.90
Direct labor
v. Double M company is a chemical manufacturer that supplies various products to industrial users. The company plans to introduce a new chemical solution called Bysap, for which it needs to develop a standard product cost. The following labor information is available on the production of Bysap.
• The product, which is bottled in 10-liter containers, is
primarily a mixture of Byclyn, Salex, and Protet.
• The finished product is highly unstable, and one 10-liter
batch out of six is rejected at final inspection. Rejected batches have no commercial value and are thrown out.
• It takes a worker 35 minutes to process one 10-liter batch of
Bysap. Employees work on eight-hour a day, including one hour per day for rest breaks and cleanup.
What is the standard labor time to produce one 10-liter batch of Bysap?
A. 35 minutes C. 48 minutes
B. 40 minutes D. 45 minutes
vi. The following direct labor information pertains to the manufacture of Part J35:
Number of hours required to make a part 2.5 DLH
Number of Direct workers 75
Number of total productive hours per week 3000
Weekly wages per worker P1,000
Laborers’ fringe benefits treated as direct labor costs 25% of wages
What is the standard direct labor cost per unit of Part J35?
A. P62.500 C. P41.670
B. P78.125 D. P84.125
Materials & Labor
Questions Nos. 7 and 8 are based on the following:
Supercold Company is a small producer of fruit-flavored frozen desserts. For many years, Supercold’s products have had strong regional sales on the basis of brand recognition. However, other companies have begun marketing similar products in the area, and price competition has become increasingly important. Haydee Mejia, the company’s controller, is planning to implement a standard costing system for Supercold and has gathered considerable information on production and material requirements for Supercold’s products. Haydee believes that the use of standard costing will allow Supercold to improve cost control and make better pricing decisions.
Supercold’s most popular products is strawberry sherbet. The sherbet is produced in 10-gallon batches, and each batch requires six quarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. Because of imperfections in the strawberries and normal spoilage, one quart of berries is discarded for every four quarts of acceptable berries. Three minutes is the standard direct labor time for sorting that is required to obtain one quart of acceptable berries. The acceptable berries are then blended with the other ingredients; blending requires 12 minutes of direct labor time per batch. After blending, the sherbet is package in quart containers. Haydee has gathered the following information from Rizza Alano, Supercold’s cost accountant.
Supercold purchases strawberries at a cost of P8.00 per quart. All other ingredients cost a total of P4.50 per gallon.
Direct labor is paid at the rate of P50 per hour.
The total cost of material an d labor require d to package the sherbet is P3.80 per quart.
Rizza Alano has a friend who owns a berry farm that has been losing money in recent years. Because of good crops, there has been an oversupply of strawberries, and prices have dropped to P5.00 per quart. Rizza has arranged for Supercold to purchase strawberries form her friend and hopes that P8.00 per quart will help her friend’s farm 208
Standard Costs and Variance Analysis become profitable again.
vii. The standard materials cost per 10-gallon batch of strawberry sherbet is:
A. P 85.00 C. P101.00
B. P 60.00 D. P105.00
viii. The standard direct labor cost per 10-gallon batch of sherbet is:
A. P50.00 C. P25.00
B. P28.75 D. P15.00
Materials variance
ix. Under a standard cost system, the materials quantity variance was recorded at P1,970 unfavorable, the materials price variance was recorded at P3,740 favorable, and the Goods in Process was debited for P51,690. Ninety-six thousand units were completed. What was the per unit price of the actual materials used?
A. P0.52 each C. P0.54 eac
B. P0.53 each D. P0.51 each
x. Blake Company has a standard price of P5.50 per pound for materials. July’s results showed an unfavorable material price variance of P44 and a favorable quantity variance of P209. If 1,066 pounds were used in production, what was the standard quantity allowed for materials?
A . 1, 104 C. 1 ,0 66
B. 1,074 D. 1,100
xi. Elite Company uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material in inventory were purchased for P105,000, and two units of raw material are required to produce one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for material was P60,000, and there was an unfavorable quantity variance of P2,500. The materials price variance for the units used in November was
A. P 2,500 U C. P12,500 U
B. P11,000 U D. P 3,500 F
xii. Sheridan Company has a standard of 15 parts of component BB costing P1.50 each. Sheridan purchased 14,910 units of component BB for P22,145. Sheridan generated a P220 favorable price variance and a P3,735 favorable quantity variance. If there were no changes in the component inventory, how many units of finished product were produced?
A. 994 units. C. 1,000 units
B. 1,090 units. D. 1,160 units
xiii. The standard usage for raw materials is 5 pounds at P40.00 per pound. Cave Company spent P131,200 in purchasing 3,200 pounds. Cave used 3,150 pounds to produce 600 units of finished product. The material quantity variance is:
A. P6,000 unfavorable C. P3,200 unfavorable B. P5,200 unfavorable D. P2,000 unfavorable
xiv. The Bohol Company uses standard costing. The following data are available for October:
Actual quantity of direct materials used 23,500 pounds Standard price of direct materials P2 per pound
Material quantity variance P1,000 U
The standard quantity of materials allowed f or October production is:
A. 23,000 lbs C. 24,000 lbs
B. 24,500 lbs D. 25,000 lbs
xv. Information on Dulce’s direct material costs for May is as follows: Actual quantity of direct materials purchased and used30,000 lbs.
Actual cost of direct materials P84,000 U nf av or ab le d ir ec t m at er ia ls u sa ge v ar ia nc e P 3 ,000 Standard quantity of direct materials allowed for May production
29,000 lbs For the month of May, Dulce’s direct materials price variance was: A. P2,800 favorable C. P2,800 unfavorable
B. P6,000 unfavorable D. P6,000 favorable
209
Standard Costs and Variance Analysis xvi. Information on Katrina Company’s direct material costs is as
follows:
Standard unit price P 3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450 Mat erials pu rch ase price variance – favor able P 240 What was the actual purchase price per unit, rounded to the
nearest centavos?
A. P3.06 C. P3.11
B . P3 .4 5 D. P3.75
xvii. Palmas Company, which has a standard cost system, had 500 units of raw material X in its inventory at June 1, purchased in May for P1.20 per unit and carried at a standard cost of P1.00. The following information pertains to raw material X for the month of June:
Actual number of units purchased 1,400
Actual number of units used 1,500
Standard number of units allowed for actual production 1,300
Standard cost per unit P1.00
Actual cost per unit P1.10
The unfavorable materials purchase price variance for raw material X for June was:
A. P 0 C. P140
B . P1 30 D. P 15 0
xviii. During March, Lumban Company’s direct material costs for the manufacture of product T were as follows:
Actual unit purchase price P6.50
S ta nd ar d qu an ti ty a ll owe d fo r a ct ua l pr od uc ti on 2, 10 0
Type R houses, using 22,000 units of material cost of P26,400. Razonable’s material price variance for April is:
A. P1,000 favorable C. P1,100 favorable B. P1,400 unfavorable D. P2,500 unfavorable
xx. Samson Candle Co. manufactures candles in various shapes, sizes, colors, and scents. Depending on the orders received, not all candles require the same amount of color, dye, or scent materials. Yields also vary, depending upon the usage of beeswax or synthetic
wax. Standard ingredients for 1,000 pounds of candles are: Input: Standard Mix Standard Cost per
Pound Beeswax 200 lbs. 1.00 Synthetic wax 840 lbs. 0.20 Colors 7 lbs. 2.00 Scents 3 lbs. 6.00 Totals 1,050 lbs. 9.20 Standard output 1,000 lbs.
Price variances are charged off at the time of purchase. During January, the company was busy manufacturing red candles for
Valentine’s Day. Actual production then was:
Input: In Pounds Beeswax 4,100 Syntheticwax 13,800 Colors 2,200 Scents 60 Total 20,160 Actualoutput 18 500
become profitable again.
vii. The standard materials cost per 10-gallon batch of strawberry sherbet is:
A. P 85.00 C. P101.00
B. P 60.00 D. P105.00
viii. The standard direct labor cost per 10-gallon batch of sherbet is:
A. P50.00 C. P25.00
B. P28.75 D. P15.00
Materials variance
ix. Under a standard cost system, the materials quantity variance was recorded at P1,970 unfavorable, the materials price variance was recorded at P3,740 favorable, and the Goods in Process was debited for P51,690. Ninety-six thousand units were completed. What was the per unit price of the actual materials used?
A. P0.52 each C. P0.54 eac
B. P0.53 each D. P0.51 each
x. Blake Company has a standard price of P5.50 per pound for materials. July’s results showed an unfavorable material price variance of P44 and a favorable quantity variance of P209. If 1,066 pounds were used in production, what was the standard quantity allowed for materials?
A . 1, 104 C. 1 ,0 66
B. 1,074 D. 1,100
xi. Elite Company uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material in inventory were purchased for P105,000, and two units of raw material are required to produce one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for material was P60,000, and there was an unfavorable quantity variance of P2,500. The materials price variance for the units used in November was
A. P 2,500 U C. P12,500 U
B. P11,000 U D. P 3,500 F
xii. Sheridan Company has a standard of 15 parts of component BB costing P1.50 each. Sheridan purchased 14,910 units of component BB for P22,145. Sheridan generated a P220 favorable price variance and a P3,735 favorable quantity variance. If there were no changes in the component inventory, how many units of finished product were produced?
A. 994 units. C. 1,000 units
B. 1,090 units. D. 1,160 units
xiii. The standard usage for raw materials is 5 pounds at P40.00 per pound. Cave Company spent P131,200 in purchasing 3,200 pounds. Cave used 3,150 pounds to produce 600 units of finished product. The material quantity variance is:
A. P6,000 unfavorable C. P3,200 unfavorable B. P5,200 unfavorable D. P2,000 unfavorable
xiv. The Bohol Company uses standard costing. The following data are available for October:
Actual quantity of direct materials used 23,500 pounds Standard price of direct materials P2 per pound
Material quantity variance P1,000 U
The standard quantity of materials allowed f or October production is:
A. 23,000 lbs C. 24,000 lbs
B. 24,500 lbs D. 25,000 lbs
xv. Information on Dulce’s direct material costs for May is as follows: Actual quantity of direct materials purchased and used30,000 lbs.
Actual cost of direct materials P84,000 U nf av or ab le d ir ec t m at er ia ls u sa ge v ar ia nc e P 3 ,000 Standard quantity of direct materials allowed for May production
29,000 lbs For the month of May, Dulce’s direct materials price variance was: A. P2,800 favorable C. P2,800 unfavorable
B. P6,000 unfavorable D. P6,000 favorable
209
Standard Costs and Variance Analysis xvi. Information on Katrina Company’s direct material costs is as
follows:
Standard unit price P 3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450 Mat erials pu rch ase price variance – favor able P 240 What was the actual purchase price per unit, rounded to the
nearest centavos?
A. P3.06 C. P3.11
B . P3 .4 5 D. P3.75
xvii. Palmas Company, which has a standard cost system, had 500 units of raw material X in its inventory at June 1, purchased in May for P1.20 per unit and carried at a standard cost of P1.00. The following information pertains to raw material X for the month of June:
Actual number of units purchased 1,400
Actual number of units used 1,500
Standard number of units allowed for actual production 1,300
Standard cost per unit P1.00
Actual cost per unit P1.10
The unfavorable materials purchase price variance for raw material X for June was:
A. P 0 C. P140
B . P1 30 D. P 15 0
xviii. During March, Lumban Company’s direct material costs for the manufacture of product T were as follows:
Actual unit purchase price P6.50
S ta nd ar d qu an ti ty a ll owe d fo r a ct ua l pr od uc ti on 2, 10 0 Quantity purchased and used for actual production 2,300
Standard unit price P6.25
Lumban’s material usage variance for March was: A. P1,250 unfavorable C. P1,250 favorable B. P1,300 unfavorable D. P1,300 favorable
xix. Razonable Company installs shingle roofs on houses. The standard material cost for a Type R house is P1,250, based on 1,000 units at a cost of P1.25 each. During April, Razonable installed roofs on 20
Type R houses, using 22,000 units of material cost of P26,400. Razonable’s material price variance for April is:
A. P1,000 favorable C. P1,100 favorable B. P1,400 unfavorable D. P2,500 unfavorable
xx. Samson Candle Co. manufactures candles in various shapes, sizes, colors, and scents. Depending on the orders received, not all candles require the same amount of color, dye, or scent materials. Yields also vary, depending upon the usage of beeswax or synthetic
wax. Standard ingredients for 1,000 pounds of candles are: Input: Standard Mix Standard Cost per
Pound Beeswax 200 lbs. 1.00 Synthetic wax 840 lbs. 0.20 Colors 7 lbs. 2.00 Scents 3 lbs. 6.00 Totals 1,050 lbs. 9.20 Standard output 1,000 lbs.
Price variances are charged off at the time of purchase. During January, the company was busy manufacturing red candles for
Valentine’s Day. Actual production then was:
Input: In Pounds Beeswax 4,100 Syntheticwax 13,800 Colors 2,200 Scents 60 Total 20,160 Actualoutput 18,500
The material yield variance is:
A. P 280 unfavorable C. P 280 favorable B. P3,989 unfavorable D. P3,989 favorable
Labor variance
xxi. The flexible budget for the month of May 2007 was for 9,000 units with direct material at P15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of P81,000. Actual output for the month was 8,500 units with P127,500 in direct material and 210
Standard Costs and Variance Analysis P77,775 in direct labor expense. Direct labor hours of 6,375 were
actually worked during the month. Variance analysis of the performance for the month of May would show a(n):
A. Favorable material quantity variance of P7,500. B. Unfavorable direct labor efficiency variance of P1,275. C. Unfavorable material quantity variance of P7,500. D. Unfavorable direct labor rate variance of P1,275.
xxii. The standard hourly rate was P4.10. Standard hours for the level of production are 4,000. The actual rate was P4.27. The labor rate variance was P654.50, unfavorable. What were the actual labor hours?
A . 3, 700 C. 3 ,8 50
B. 4,150 D. 4,000
xxiii. Clean Harry Corp. uses two different types of labor to manufacture its product. The types of labor, Mixing and Finishing, have the following standards:
Labor Type Standard Mix Std Hourly Rate Standard Cost Mixing 500 hours P10 P5,000 Finishing 250 hours P 5 P1,250 Yield: 4,000 units
During January, the following actual production information was provided:
LaborType ActualMix
Mixing 4,500hours
Finishing 3,000hours
Yield: 36,000 units
xxv. Hingis had a P750 unfavorable direct labor rate variance and an P800 favorable efficiency variance. Hingis paid P7,150 for 800 hours of labor. What was the standard direct labor wage rate?
A . P8. 94 C. P 8. 00
B. P7.94 D. P7.80
xxvi.Powerless Company’s operations for April disclosed the following data relating to direct labor:
Actualcost P10,000 Ratevariance 1,000 favorable Efficiency variance 1,500 unfavorable Standard cost P 9,500
Actual direct labor hours for April amounted to 2,000. Powerless’ standard direct labor rate per hour in April was:
A . P5. 50 C. P 5. 00
B. P4.75 D. P4.50
xxvii. Lion Company’s direct labor costs for the month of January were as follows:
Actual direct labor hours 20,000
Standard direct labor hours 21,000
Direct labor rate variance – Unfav. P 3,000
Total payroll P126,000
What was Lion’s direct labor efficiency variance? A. P6,000 favorable C. P6,150 favorable B. P6,300 favorable D. P6,450 favorable
