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B. only normal costing can be used with absorption costing.
THEORY
Basic concepts
1. The best characteristics of a standard cost system is
A. all variances from standard should be reviewed
B. standard can pinpoint responsibility and help
motivation C
D. astllasnidganrific
d caonsttuinvfaovlvoerasbcleosvtacroiantrcoelswshicohuldis bcoesrte
rveiedwucetdion
2. Standard costs are used for all of the following except:
A. controlling costs
forming a basis for price setting
C. income determination B.
D. measuring efficiencies
3. Standard costs are least useful for
A. Determining minimum inventory levels
B. Job order production systems
C. Measuring production efficiency
D. Simplifying costing procedures
4. To which of the following is a standard cost nearly like?
A. Budgeted cost.
B. Estimated cost.
C. Period cost.
D. Product cost.
5. A difference between standard costs used for cost control and budgeted costs
A. Can exist because standard costs must be determined after the budget is completed.
B. Can exist because budgeted costs are historical costs while standard costs are based on
engineering studies.
C. Can exist because establishing budgeted costs involves employee participation and
standard costs do not.
D. Can exist because standard costs represent what costs should be while budgeted costs
represent expected actual costs.
6. Normal costing and standard costing differ in that
A. normal costing is less appropriate for multiproduct firms
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
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C. the two systems can show different overhead budget variances.
D. the two systems show different volume variances if standard hours do not equal
actual hours.
7. If a company wishes to establish factory overhead budget system in which estimated costs
cAa.n bCeadpeitraivlebdudgiretc.tly from estimates of activityCl.eveFlisx,eidtsbhuodugldetpt.repare
a B. Discretionary budget.
D. Flexible budget.
8. Lanta Restaurant compares monthly operating results with a static budget. When actual
sales are less than budget, would Lanta usually report favorable variances on variable
food costs and fixed supervisory salaries.
A.
B.
C.
D.
Variable food costs
Yes
Yes
No
No Fixed supervisory salaries
Yes
No
Yes
No
9. The primary difference between a fixed (static) budget and a variable (flexible) budget is that
a fixed budget:
A. includes only fixed costs; while variable budget includes only variable costs
B. cannot be changed after the period begins; while a variable budget can be changed
after the period begins
C. is concerned only with future acquisitions of fixed assets; while a variable budget
is concerned with expenses that vary with sales
D. is a plan for a single level of sales (or other measure of activity); while a variable
budget consists of several plans, one for each of several levels of sales (or other
measure of activity)
10. Standard costing will produce the same results as actual or conventional costing
when standard cost variances are distributed to
A. A balance sheet account
C. Cost of goods sold
B. An income or expense account
D. Cost of goods sold and inventories
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
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11. Which of the following term is best identified with a system of standard cost?
A. Contribution approach.
B. Management by exception.
C. Marginal costing.
D. Standard accounting system.
B. used with variable costing while a standard fixed cost is used with absorption costing.
C. based on practical capacity and a standard fixed cost can be based on any level of
activity.
D. based on an input factor like direct labor hours and a standard cost per unit is based on a
Standard setting
unit of output.
12. W
esotrkdiensgcrdibaeysotrheshraift,ewoifthoouutptuotvwehr-icehxeqrutiaolnif,ieepdrowvoidrkedrsthceayn
a iicehveonaesoafnthaevfeorllaogweinogvter mthsebw
ach
adhere to the specified method of working and are well motivated in their work?
A. Standard hours
C. Standard time
B. Standard performance
D. Standard unit
13. When standard costs are used in a process-costing system, how, if at all, are equivalent units
of production (EUP) involved or used in the cost report at standard?
A. Equivalent units are not used.
B. Equivalent units are computed using a special approach.
C. The standard equivalent units are multiplied by the actual cost per unit.
D. The actual equivalent units are multiplied by the standard cost per unit.
14. The type of standard that is intended to represent challenging yet attainable results is:
A. controllable cost standard
B. expected actual standard
C. flexible budget standard
D. normal standard
E. theoretical standard
15. A company using very tight standards in a standard cost system should expect that
A. No incentive bonus will be paid
B. Most variances will be unfavorable
C. Employees will be strongly motivated to attain the standard
D. Costs will be controlled better than if lower standards were used
16. A predetermined overhead rate for fixed costs is unlike a standard fixed cost per unit in that a
predetermined overhead rate is
A. likely to be higher than a standard fixed cost per unit.
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
17. The variable factory overhead rate under the normal volume, practical capacity, and expected
activity levels would be the
A. Same except for expected capacity
B. Same except for normal volume
C. Same except for practical capacity
D. Same for all three activity levels
Materials & labor variances
18. For the doughnuts of McDonut Co. the Purchasing Manager decided to buy 65,000 bags of
flour with a quality rating two grades below that which the company normally purchased. This
purchase covered about 90% of the flour requirement for the period. As to the material
variances, what will be the likely effect?
Price variance
Usage variance
A.
Favorable
Favorable
B.
Favorable
Unfavorable
C.
Unfavorable
Favorable
D.
No effect
Unfavorable
19. What type of direct material variances for price and usage will arise if the actual number of
pounds of materials used was less than standard pounds allowed but actual cost exceeds
standard cost?
A.
B.
C.
D.
Usage
Favorable
Favorable
Unfavorable
Unfavorable
Price
Favorable
Unfavorable
Favorable
Unfavorable
20. The journal entry to record the direct materials quantity variance may be recorded
A. Only when direct materials are purchased
B. When inventory is taken at the end of the year.
C. Only when direct materials are issued to production
D. Either (A) or (C)
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21. A manager prepared the following table by which to analyze labor costs for the month:
Actual Hours at
Actual Hours at
Standard Hours at
Actual Rate
Standard Rate
Standard Rate
$10,000
$9,800
$8,820
What variance was $980?
A. Labor efficiency variance.
B. Labor rate variance.
C. Labor spending variance.
D. Volume variance.
22. A credit balance in the labor efficiency variance indicates that:
A. actual hours exceed standard hours
B. standard hours exceed actual hours
C. actual rate and actual hours exceed standard rate and standard hours
D. standard rate and standard hours exceed actual rate and actual hours
23. A debit balance in the labor efficiency variance indicates that
A. Actual hours exceed standard hours.
B. Actual rate exceeds standard rate.
C. Standard hours exceed actual hours.
D. Standard rate exceeds actual rate.
24. If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the
number of hours allowed, the labor rate variance and labor efficiency variance will be
A.
B.
C.
D.
Labor Rate Variance
Favorable
Favorable
Unfavorable
Unfavorable
Labor Efficiency Variance Favorable Unfavorable
Favorable
Unfavorable
25. The variance resulting from obtaining an output different from the one expected on the basis of
in
A.puteifsficthieen:cy variance
B. mix variance
C. usage variance
D. yield variance
Overhead variances
26. In the analysis of standard cost variances, the item which receives the most diverse treatment
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
in accounting is
A. Direct labor cost
B. Direct material cost
C. Factory overhead cost
D. Variable cost.
27. The total overhead variance is
A
B B
B.
T aesediffoenreancteuablehtowueresnwbourdkeegdetfeodr tohve ruhneitasdparonduacpepdl.ied overhead. C.
Th
The difference between actual overhead costs and applied overhead.
D. The difference between actual overhead costs and budgeted overhead.
28. When expenses estimated for the capacity attained differ from the actual expenses incurred,
the resulting balance is termed the
A. Activity variance.
B. Budget variance.
C. Unfavorable variance.
D. Volume variance.
29. If a company uses a predetermined rate for absorption of manufacturing overhead, the volume
variance is
A. The under- or over-applied fixed cost element of overhead.
B. The under- or over-applied variable cost element of overhead.
C. The difference between budgeted cost and actual cost of fixed overhead items.
D. The difference between budgeted cost and actual cost of variable overhead items.
30. The production volume variance occurs when using the
A. Absorption costing approach because of production exceeding the sales.
B. Variable costing approach because of sales exceeding the production for the period.
C. Variable costing approach because of production exceeding the sales for the period.
D. Absorption costing approach because production differs from that used in setting the fixed
overhead rate used in applying fixed overhead to production.
31. Henley Company uses a standard cost system in which it applies manufacturing overhead to
units of product on the basis of direct labor hours. For the month of January, the fixed
manufacturing overhead volume variance was $2,220 favorable. The company uses a fixed
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manufacturing overhead rate of $1.85 per direct labor hour. During January, the standard
direct labor hours allowed for the month's output:
A. exceeded denominator hours by 1,000. C. fell short of denominator hours by 1,000.
B. exceeded denominator hours by 1,200. D. fell short of denominator hours by 1,200.
32. U
cosnintgainthsebotw
thov-avraiaribalnecaendmfeixtheoddovfoerhaenadlyezleinmgeonvtse?rhead, which of the following variances
Controllable (Budget) Variance
Volume Variance
Efficienc y Variance
A.
Yes
Yes
Yes
B.
Yes
Yes
No
C.
Yes
No
No
D.
No
No
No
B. Production.
D. Sales.
36. Under a standard cost system, the materials efficiency variance are the responsibility of
A. Production and industrial engineering.
B. Purchasing and industrial engineering.
C. Purchasing and sales.
D. Sales and industrial engineering.
37. Which of the following people is most likely responsible for an unfavorable variable overhead
efficiency variance?
A. accountant
B. production supervisor
C. purchasing agent
D. supplier
38. Which of the following standard costing variances would be least controllable by a production
33. During 1990, a department’s three-variance factory O/H standard costing system reported
unfavorable spending and volume variances. The activity level selected for allocating factory
O/H to the product was based on 80% of practical capacity. If 100% of practical capacity had
been selected instead, how would the reported unfavorable spending and volume variances
have been affected?
A.
B.
C.
D.
Spending Variance Increased
Increased
Unchanged
Unchanged
Volume Variance
Increased
Unchanged
Increased
Unchanged
34. A spending variance for variable factory O/H based on direct labor hours is the difference
between actual variable factory O/H and the variable factory O/H that should have been
incurred for the actual hours worked. This variance results from
A. Price differences for overhead costs
B. Quantity differences for overhead costs
C
Prififceer eanncdeqsucaanutsiteyddbiffyepreroncdeusc tofio
o rnovvoelurhmeeadv acroiastttsio.n
D.. D
Responsibility for variances
35. Which department is typically responsible for a materials price variance?
A. Engineering.
C. Purchasing.
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
supervisor?
A. Labor efficiency.
B. Materials usage.
C. Overhead efficiency.
D. Overhead volume.
Investigating variances
39. Management scrutinizes variances because
A. It is desirable under conventional knowledge on good management.
B. Management needs to determine the benefits foregone by such variances.
C. Management desires to detect such variances to be able to plan for promotions.
D. Management recognizes the need to know why variances happen to be able to make
corrective actions and fairly reward good performers.
40. A company reported a significant materials efficiency variance for the month of January. All of
the following are possible explanations for this variance except
A. Cutting back preventive maintenance.
B. Processing a large number of rush orders.
C. Inadequately training and supervising the labor force.
D. Producing more units than planned for in the master budget.
41. Which variance is LEAST likely to be affected by hiring workers with less skill than those
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MANAGEMENT ADVISORY SERVICES
already working?
A. Labor rate variance.
B. Material price variance.
HILARIO TAN
C. Material use variance.
D. Variable overhead efficiency variance.
42. Which of the following unfavorable variances is directly affected by the relative position of a
pr
A.oduMcatitoenriaplrsocmeisxs. on a learning curve?
B. Materials price.
C. Labor efficiency.
D. Labor rate.
43. Which one of the following would not explain an adverse direct labor efficiency variance?
A. A reduction in direct labor training
B. Poor scheduling of direct labor hours
C. Unusually lengthy machine breakdowns
D. Setting standard efficiency at a level that is too low
44. Which of the following is the most probable reason a company would experience an
unfavorable labor rate variance and a favorable efficiency variance?
A. Defective materials caused more labor to be used to product a standard unit.
B. Because of the production schedule, workers from other production areas were assigned to
assist in this particular process.
C. The mix of workers assigned to the particular job was heavily weighted toward the use of
higher-paid, experienced individuals.
D. The mix of workers assigned to the particular job was heavily weighted toward the use of
new, relatively low-paid unskilled workers.
45. You used predetermined overhead rates and the resulting variances when compared with the
results using the actual rates were substantial. Production data indicated that volumes were
lower than the plan by a large difference. This situation can be due to
A. Overhead costs being recorded as planned.
B. Overhead being substantially composed of fixed costs.
C. Overhead being substantially composed of variable costs.
D. Products being simultaneously manufactured in single runs.
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
46. Overapplied factory overhead results when
A. A plant is operated at less than its normal capacity.
B. Factory overhead costs incurred are less than the costs charged to production.
C. Factory overhead costs incurred are greater than the costs charged to production.
D. F
praocdtourcyeodv. erhead costs incurred are unreasonably large in relation to the number of units
PROBLEMS
Flexible budget
1. Premised on past experience, Mayo Corp. adopted the following budgeted formula for
estimating shipping expenses. The company’s shipments average 12 kilos per shipment. Shipping
costs = P8,000 + (0.25 x kgs. shipped)
Planned
Actual
Sales order
800
780
Shipments
800
820
Units shipped
8,000
9,000
Sales
240,000
288,000
Total kilograms shipped
9,600
12,300
The actual shipping costs for the month amounted to P10,500. The appropriate monthly
flexible budget allowance for shipping costs for purposes of performance evaluation would be
A. P10,250
C. P10,400
B. P10,340
D . P11 , 075
Standard setting
2. Hankies Unlimited has a signature scarf for ladies that is very popular. Certain production and
marketing data are indicated below:
Cost per yard of cloth
P36.00
Allowance for rejected scarf
5% of production
Yards of cloth needed per scarf ................................................ 0.475 yard
Airfreight from supplier
P0.60/yard
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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 cloth per scarf. Rejects have
no market value. Materials are used at the start of production.
C
shaelceutsla.te the standard cost of cloth per scarf that Hankies Unlimited should use in its cost
A. P16.87
C. P17.76
B. P17.30
D. P18.21
used in November was
A. $2,500 U
B. $3,500 F
C. $11,000 U
D. $12,500 U
6. The Porter Company has a standard cost system. In July the company purchased and used
2w2a,s50$01,p8o7u5nU
dsnfoafvdoiraebctlem
ereiadlsfoqruJaunlytityprvoadruiacnticoen
; atnedriathleatsatannadcatrudalqcuoasnttoityf $o5f3m,0a0te0;ritahlse amllaotw
was 21,750 pounds. The materials price variance for July was:
A. $2,725 F.
C. $3,250 F.
B. $2,725 U.
D. $3,250 U.
3. The following direct labor information pertains to the manufacture of product Glu: Time
required to make one unit
Number of direct workers
Number of productive hours per week, per worker
Weekly wages per worker
Workers’ benefits treated as direct labor costs
2 direct labor hours
50
40
$500
20% ofwages
What is the standard direct labor cost per unit of product Glu?
A. $12.
C. $24.
B. $15.
D. $30.
4. PALOS Manufacturing Co. has an expected production level of 175,000 product units for 19x7.
Fixed factory overhead is P450,000 and the company applies factory overhead on the basis of
expected production level at the rate of P5.20 per unit. The variable overhead cost per unit is
A. P2.57
C. P2.93
B. P2.63
D. P3.02
Materials variances
5. ChemKing uses a standard costing system in the manufacture of its single product. The
35,000 units of raw material in inventory were purchased for $105,000, 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 $60,000, and there
was an unfavorable quantity variance of $2,500. The materials price variance for the units
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
7. Cox Company's direct material costs for the month of January were as follows:
Actual quantity purchased
Actual unit purchase price
Materials price variance – unfavorable (based on purchases)
Standard quantity allowed for actual production
18,000 kilograms
$ 3.60 per kilogram
$ 3,600
16,000 kilograms
Actual quantity used
15,000 kilograms
For January there was a favorable direct material quantity variance of
A. $3,360.
C. $3,400.
B. $3,375.
D. $3,800.
8. ALPHA Co. uses a standard cost system. Direct materials statistics for the month of May,
19x7 are summarize below:
Standard unit price
Actual units purchased
Standard units allowed for actual production
Materials price variance- favorable
What was the actual purchase price per unit?
A. P75.00
C. P88.50
B. P85.89
D. P89.85
P90.00
40,000
36,250
P6,000
9. JKL Company has a standard of 15 parts of component X costing P1.50 each. JKL purchased
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MANAGEMENT ADVISORY SERVICES
HILARIO TAN
14,910 units of component X for P22,145. JKL 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. 1,090 units.
B. 1,000 units
D. 1,160 units
Questions 10 and 11 are based on the following information.
Valenzuela Plastics Inc. has set a standard cost, P5.25 per unit for Material D and P12.25 per unit
for Material E. In June, Valenzuela bought 17,500 units of Material D and 8,750 units of Material E.
All Material D, except 1,400 units were bought at the standard unit cost. The 1,400 units had a unit
cost of P6.15. Valenzuela bought 7,875 units of Material E at standard cost and 875 units at a unit
cost of P14.
In accordance with the standard two units of Material D and one unit of Material E should be used
to make each unit of Product F. In January, 7,000 units of Product F were made and 15,050 units
of Material D were used and 7,175 units of Material E were used.
10. The total materials price variance is
A. P2,791.25 F
B. P2,791,25 U
B. $49,440 U
D. $50,400 F
13. TAMARAW, Inc. has a maintenance shop where repairs to its motor vehicles are done.
During last month’s labor strike, certain recorded were lost. The actual input of direct labor
hours was 1,000, and the resulting direct labor budget variance was a favorable P3,400. The
snteacnedsasridtateddir etchte lahbiroinrg roaftehigwhaesr -pPa2id8.0w0orkpers hforu rs,o m
buet joabns uanedxpheacdterdesulaltbeodr ins haorrtagt e
variance of P800. The actual direct labor rate was
A. P27.20 per hour
C. P30.25 per hour
B. P28.80 per hour
D. P31.40 per hour
14. ACE Company’s operations for the month just ended originally set up a 60,000 direct labor
hour level, with budgeted direct labor of P960,000 and budgeted variable overhead of
P240,000. The actual results revealed that direct labor incurred amounted to P1,148,000 and
that the unfavorable variable overhead variance was P40,000. Labor trouble caused an
unfavorable labor efficiency variance of P120,000, and new employees hired at higher rates
resulted in an actual average wage rate of P16.40 per hour. The total number of standard
direct labor hours allowed for the actual units produced is
A. 52,500
C. 62,500
B. 60,000
D. 70,000
C. P13,781.25 F
D. P13,781.25 U
11. The total materials quantity variance is
A. P7,656.25 F
B. P7,656.25 U
C. P13,781.25 F
D. P13,781.25 U
Labor variances
12. Pane Company's direct labor costs for April are as follows:
Standard direct labor hours
Actual direct labor hours
Total direct labor payroll
Direct labor efficiency variance – favorable
What is Pane's direct labor rate variance?
A. $44,496 U
C. $49,440 F
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
15. To improve productivity, ST. MICHAEL Corp. instituted a bonus plan where employees are
42,000
41,200
$247,200
$3,840
paid 75% of the time saved when production performance exceeds the standard level of
production. The company computes the bonus on the basis of four-week periods. The
standard production is set at 3 units per hour. Each employee works 37 hours per week, and
the wage rate is P24 per hour. Below are data for one 4-week period:
Weekly Production (Units)
Employee
1st
2nd
Total
3rd
4th
ALAN
107
100
110
108
425
JOEL
104
110
115
115
444
ROMY
108
112
112
133
465
TONY
123
120
119
124
486
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MANAGEMENT ADVISORY SERVICES
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The employee who had the inconsistent performance (sometimes performing below standard)
but got a bonus is
A. Alan = P36 bonus.
C. Romy = P126 bonus.
B. Joel = P54 bonus.
D. Tony = P252 bonus.
Overhead variances
16. The following were among Gage Co.’s 2000 costs:
Normal spoilage
Freight out
Excess of actual manufacturing costs over standard costs
Standard manufacturing costs
Actual prime manufacturing costs
Gage’s 2000 actual manufacturing overhead was
A. $40,000
C. $55,000
B. $45,000
D. $120,000
$ 5,000
10,000
20,000
100,000
80,000
10,000
$100,000
60,000
20,000
$ 20,000
Factory overhead:
$ 30,000
Variable
Fixed
10,000
There were no beginning inventories. At the end of the year, no work was in process, total
factory overhead incurred was $39,500, and underapplied factory overhead was $1,500.
Factory overhead was applied on the basis of budgeted unit production. How many units were
produced this year?
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
C. 10,000.
D. 10,250.
18. Daly had a $18,000 favorable volume variance, a $15,000 unfavorable variable overhead
spending variance, and $12,000 total over-applied overhead. The fixed overhead budget
vAa.ria$n9c,e00w0asF.
B. $16,000 F.
17. At the beginning of the year, Smith Inc. budgeted the following:
Units
Sales
Minus:
Total variable expenses
Total fixed expenses
Net income
A. 9,500.
B. 9,875.
C. $16,000 U.
D. 49,000 U.
19. Universal Company uses a standard cost system and prepared the following budget at normal
capacity for the month of January:
Direct labor hours
Variable factory O/H
Fixed factory O/H
Total factory O/H per DLH
24,000
$48,000
$108,000
$6.50
Actual data for January were as follows:
Direct labor hours worked
22,000
Total factory O/H
$147,000
Standard DLH allowed for capacity attained
21,000
Using the two-way analysis of O/H variances, what is the budget (controllable) variance for
January?
A. $3,000 F.
C. $10,500 U.
B. $9,000 F.
D. $13,500 U.
20. JKL Co. has total budgeted fixed costs of P75,000. Actual production of 19,500 units resulted
in a $3,000 favorable volume variance. What normal capacity was used to determine the fixed
overhead rate?
A. 16,500
C. 18,750
B. 17,590
D. 20,313
21. TYD, Inc. reported the following data for 1996:
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MANAGEMENT ADVISORY SERVICES
Actual hours
Denominator hours
Standard hours allowed for output
Fixed predetermined overhead rate
Variable predetermined overhead rate
HILARIO TAN
120,000
150,000
140,000
P6 per hour
P4 per hour
TY
A. D’s
P6109,09060vofaluvm
oreabvlaer.iance was
B. No volume variance.
C. P60,000 under-applied.
D. P60,000 which is neither favorable nor under-applied.
22. Peters Company uses a flexible budget system and prepared the following information for the
year
Percentage of total capacity
80%
90%
Direct labor hours
24,000
27,000
Variable factory O/H
$48,000
$54,000
Fixed factory O/H
$108,000
$108,000
Total factory O/H rate per DLH
$6.50
$6.00
Peters operated at 80% capacity during the year but applied factory overhead based on the
90% capacity level. Assuming that actual factory O/H was equal to the budgeted amount for
the attained capacity, what is the amount of O/H variance for the year?
A. $6,000 over-absorbed.
C. $6,000 under-absorbed.
B. $12,000 over-absorbed.
D. $12,000 under-absorbed.
23. Patridge Company uses a standard cost system in which it applies manufacturing overhead to
units of product on the basis of direct labor hours. The information below is taken from the
company's flexible budget for manufacturing overhead:
Percent of capacity
70%
80%
90%
Direct labor hours
21,000
24,000
27,000
Variable overhead
$ 42,000
$ 48,000
$ 54,000
Fixed overhead
108,000
108,000
108,000
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
Total overhead
$150,000
$156,000
$162,000
During the year, the company operated at exactly 80% of capacity, but applied manufacturing
overhead to products based on the 90% level. The company's fixed overhead volume variance
for the year was:
A. $6,000 F.
C. $12,000 F.
B. $6,000 U.
D. $12,000 U
Problems 24 and 25 are based on the following information.
The MABINI CANDY FACTORY has the following budgeted factory overhead costs:
Budgeted fixed monthly factory overhead costs
P85,000
Variable factory overhead
P4.00 per direct labor hour
For the month of January, the standard direct labor hours allowed were 25,000. An analysis of the
factory overhead shows that in January, the factory had an unfavorable budget (controllable)
variance of P3,500 and a favorable volume variance of P1,200. The factory uses a two-way
analysis of factory overhead variances.
24. The actual factory overhead incurred in January was
A. P103,500
C. P186,200
B. P181,500
D. P188,500
25. The applied factory overhead in January was
A. P103,500
C. P186,200
B. P183,800
D. P188,500
Questions 26 thru 28 are based on the following information.
The Murray Company makes and sells a single product. The company recorded the following
activity anNducmobsetrdoaftaunfoitrsMcaoym:pleted
Standard direct labor-hours allowed per unit of product
Budgeted direct labor-hours (denominator activity)
Actual fixed overhead costs incurred
Volume variance
45,000 units
1.5 DLHS
72,000 DLHS
$66,000
$4,275 U
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HILARIO TAN
The fixed portion of the predetermined overhead rate is $0.95 per direct labor-hour.
26. The amount of fixed overhead contained in the company's overhead flexible budget for May
was:
A. $64,125.
C. $68,400.
B. $67,500.
D. $70,275.
27. The amount of fixed manufacturing overhead cost applied to work in process during May was:
A. $42,750.
B. $61,725.
C. $62,700.
D. $64,125.
Fixed O/H expenses, actual
Fixed O/H expenses, budgeted
Actual hours
Standard hours
Variable O/H rate per DLH
$7,200
$7,000
3,500
3,800
$2.50
A
vasrsiaunmcein?g that Tyro uses a three-way analysis of O/H variances, what is the spending
A. $200 U
C. $750 U.
B. $750 F.
D. $950 F
32. At Overland Company, maintenance cost is exclusively a variable cost that varies directly with
28. The fixed overhead budget variance for May was:
A. $2,400 F.
B. $2,400 U.
C. $6,000 F.
D. $6,000 U.
29. Web Company uses a standard cost system in which manufacturing overhead is applied to
units of product on the basis of machine hours. During February, the company used a
denominator activity of 80,000 machine hours in computing its predetermined overhead rate.
However, only 75,000 standard machine hours were allowed for the month's actual production.
If the fixed overhead volume variance for February was $6,400 unfavorable, then the total
budgeted fixed overhead cost for the month was:
A. $96,000.
C. $100,000.
B. $98,600.
D. $102,400.
30. Given for the variable factory overhead of GHI Products, Inc.: P39,500 actual input at
budgeted rate, P41,500 flexible budget based on standard input allowed for actual output,
P2,500 favorable flexible budget variance. Compute the spending variance.
A. P500 favorable.
C. P2,000 favorable.
B. P500 unfavorable.
D. P2,000 unfavorable.
machine-hours. The performance report for July showed that actual maintenance costs totaled
$9,800 and that the associated spending variance was $200 unfavorable. If 8,000 machinehours were actually worked during July, the budgeted maintenance cost per machine-hour
was:
A. $1.20.
C. $1.25.
B. $1.225.
D. $1.275.
Questions 33 & 34 are based on the following information.
Raff Co. has a standard cost system in which manufacturing overhead is applied to units of product
on the basis of direct labor hours (DLHs). The following standards are based on 100,000 direct
labor hours:
Variable overhead
2 DLHs @ $3 per DLH = $6 per unit
Fixed overhead
2 DLHs @ $4 per DLH = $8 per unit
The following information pertains operations during March:
Units actually produced
38,000
Actual direct labor hours worked
80,000
Actual manufacturing overhead incurred:
Variable overhead
$250,000
Fixed overhead
$384,000
31. The following information is available from the Tyro Company:
Actual factory O/H
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
$15,000
33. For March, the variable overhead spending variance was:
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MANAGEMENT ADVISORY SERVICES
A. $6,000 F.
B. $10,000 U.
HILARIO TAN
C. $12,000 U.
D. $22,000 F.
34. For March, the fixed overhead volume variance was:
A. $80,000 F.
C. $96,000 F.
B. $80,000 U.
D. $96,000 U.
Total variance
35. KNOTTY, Inc. estimated the cost of a project it started in October 19x4 as follows: Direct
materials, P495,000; direct labor, 6,000 hours at P30 per hour; variable overhead, P24 per
direct labor hour. By the end of the month, all the required materials have been used at
P491,900; labor was 80% complete at 4,650 hours at P30 per hour; and, the variable
overhead amounted to P113,700. The total variance for the project as at the end of the month
was
A. P7,500 U
C. P9,000 F
B. P8,400 U
D. P9,100 F
B. P500,000
D . P1, 200, 000
Normal costing
38. Nil Co. uses a predetermined factory O/H application rate based on direct labor cost. For the
year ended December 31, Nil’s budgeted factory O/H was $600,000, based on a budgeted
vfaoclutomrye Oo/fH50a,m
00o0undteiredcttola$b6o2r0h,0o0u0r,s,waittha cstuaanlddairdecdtirleacbtorlacbosrt roatfe$o3f25$,600p0e.r hFourrt.heAycetuaar,l
over-applied factory O/H was
A. $20,000
C . $30 , 000
B. $25,000
D. $50,000
39. MNO Company applies overhead at P5 per direct labor hour. In March 2001, MNO incurred
overhead of P120,000. Under applied overhead was P5,000. How many direct labor hours
did MNO work?
A. 25,000
C. 24,000
B. 22,000
D. 23,000
36. A defense contractor for a government space project has incurred $2,500,000 in actual design
40. Margolos, Inc. ends the month with a volume variance of $6,360 unfavorable. If budgeted
costs to date for a guidance system whose total budgeted design cost is $3,000,000. If the
design phase of the project is 60% complete, what is the amount of the contractor's current
overrun or savings on this design work?
A. $300,000 savings.
C. $500,000 savings.
B. $500,000 overrun.
D. $700,000 overrun.
fixed factory O/H was $480,000, O/H was applied on the basis of 32,000 budgeted machine
hours, and budgeted variable factory O/H was $170,000, what were the actual machine hours
(AH) for the month?
A. 31,576
C. 32,000
B. 31,687
D. 32,424
37. SUPER Co. at normal capacity, operates at 600,000 labor hours with standard labor rate of
41. ABC Company uses the equation P300,000 + P1.75 per direct labor hour to budget
P20 per hour. Variable factory overhead is applied at the rate of P12 per labor hour. Four
units should be completed in an hour.
Last year, 1,350,000 units were produced using 300,000 labor hours. All labor hours were
paid at the standard rate, and actual overhead cost consisted of P3,738,000 for variable items
and P3,000,000 fixed items.
The total labor and overhead costs saved, by producing at more than standard, amounted to
A. P450,000
C. P750,000
manufacturing overhead. ABC has budgeted 125,000 direct labor hours for the year. Actual
results were 110,000 direct labor hours, P297,000 fixed overhead, and P194,500 variable
overhead. What is the fixed overhead volume variance for the year?
A. P2,000 F
C. P35,000 U.
B. P3,000 F
D. P36,000 U.
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
Comprehensive
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MANAGEMENT ADVISORY SERVICES
HILARIO TAN
Questions 42 and 43 are based on the following information.
Based on normal capacity operations, Sta. Ana Company employs 25 workers in its Refining
Department, working 8 hours a day, 20 days per month at a wage rate of P6 per hour. At normal
capacity, production in the department is 5,000 units per month. Indirect materials average P0.25
per direct labor hour; indirect labor cost is 12½% of direct labor cost; and other overhead are P0.15
6. D
7. D
8. B
9. D
10. D
31. B
32. C
33. C
34. C
35. C
6. C
7. C
8. D
9. D
10. B
31. B
32. A
33. B
34. D
35. D
pTehredfilrexcibtlea bourdhgoeutra.t the normal capacity activity level follows:
Direct materials
Direct labor
Fixed factory overhead
Indirect materials
Indirect labor
Other overhead
Total
Cost per unit
11. B
12. B
13. D
14. D
15. B
16. D
17. D
18. B
19. B
20. C
36. A
37. B
38. D
39. D
40. D
41. B
42. C
43. D
44. C
45. B
11. B
12. B
13. B
14. C
15. C
16. A
17. A
18. A
19. A
20. C
36. D
37. D
38. C
39. D
40. A
41. D
42. D
43. C
221. A
B
23. A
24. D
25. D
46. B
C
212. D
23. D
24. D
25. C
P 4,000
24,000
1,200
1,000
3,000
600
P 33,800
P 6.76
42. The cost per unit at 60% capacity is
A. P6.00
B. P6.50
C. P6.82
D . P6. 92
43. The total production cost for one month at 80% capacity is
A. P20,760
B. P21,500
C. P27,280
D. P30,160
ANSWER KEY
Theory
1. B
2. C
3. A
4. A
5. D
Problem
26. C
27. C
28. B
29. A
30. D
1. D
2. C
3. D
4. B
5. D
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
26. C
27. D
28. A
29. D
30. A
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HILARIO TAN
MSQ-03 – STANDARD COSTING & VARIANCE ANALYSIS
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