CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
MANAGEMENT ADVISORY SERVICES
STANDARD COSTING & VARIANCE ANALYSIS
THEORY
1. Which one of the following terms best describes the rate of output which qualified workers
can achieve as an average over the working day or shift, without over-exertion, provided they
adhere to the specified method of working and are well motivated in their work?
A. Standard time
B. Standard hours C. Standard unit
D. Standard performance
2. The best characteristics of a standard cost system is
A. standard can pinpoint responsibility and help motivation
B. all variances from standard should be reviewed
C. all significant unfavorable variances should be reviewed
D. standard cost involves cost control which is cost reduction
3. Standard costs are used for all of the following except:
A. income determination
C. measuring efficiencies
B. controlling costs
D. forming a basis for price setting
4. Standard costs are least useful for
A. Measuring production efficiency
B. Simplifying costing procedures
C. Job order production systems
D. Determining minimum inventory levels
5. To which of the following is a standard cost nearly like?
A. Estimated cost. B. Budgeted cost.
C. Product cost.
D. Period cost.
6. 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 standard costs represent what costs should be while budgeted costs
represent expected actual costs.
C. Can exist because budgeted costs are historical costs while standard costs are based on
engineering studies.
D. Can exist because establishing budgeted costs involves employee participation and
standard costs do not.
7. Normal costing and standard costing differ in that
A. the two systems can show different overhead budget variances.
B. only normal costing can be used with absorption costing.
C. the two systems show different volume variances if standard hours do not equal actual
hours.
D. normal costing is less appropriate for multiproduct firms
8. 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 actual equivalent units are multiplied by the standard cost per unit.
D. The standard equivalent units are multiplied by the actual cost per unit.
9. The type of standard that is intended to represent challenging yet attainable results is:
A. theoretical standard
D. normal standard
B. flexible budget standard
E. expected actual standard
C. controllable cost standard
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10. A company using very tight standards in a standard cost system should expect that
A. Most variances will be unfavorable
B. No incentive bonus will be paid
C. Costs will be controlled better than if lower standards were used
D. Employees will be strongly motivated to attain the standard
11. A predetermined overhead rate for fixed costs is unlike a standard fixed cost per unit in that a
predetermined overhead rate is
A. based on an input factor like direct labor hours and a standard cost per unit is based on a
unit of output.
B. based on practical capacity and a standard fixed cost can be based on any level of
activity.
C. used with variable costing while a standard fixed cost is used with absorption costing.
D. likely to be higher than a standard fixed cost per unit.
12. If a company wishes to establish factory overhead budget system in which estimated costs
can be derived directly from estimates of activity levels, it should prepare a
A. Flexible budget. B. Fixed budget.
C. Capital budget. D. Discretionary budget.
13. 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
14. The primary difference between a fixed (static) budget and a variable (flexible) budget is that
a fixed budget:
A. cannot be changed after the period begins; while a variable budget can be changed after
the period begins
B. 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)
C. includes only fixed costs; while variable budget includes only variable costs
D. is concerned only with future acquisitions of fixed assets; while a variable budget is
concerned with expenses that vary with sales
15. Which of the following term is best identified with a system of standard cost?
A. Contribution approach.
C. Marginal costing.
B. Management by exception.
D. Standard accounting system.
16. Which department is typically responsible for a materials price variance?
A. Engineering.
B. Production.
C. Purchasing.
D. Sales.
17. Under a standard cost system, the materials efficiency variance are the responsibility of
A. Production and industrial engineering. C. Purchasing and sales.
B. Purchasing and industrial engineering. D. Sales and industrial engineering.
18. Which of the following people is most likely responsible for an unfavorable variable
overhead efficiency variance?
A. production supervisor
C. supplier
B. accountant
D. purchasing agent
19. Which variance is LEAST likely to be affected by hiring workers with less skill than those
already working?
A. Material use variance.
C. Material price variance.
B. Labor rate variance.
D. Variable overhead efficiency variance.
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20. Which of the following standard costing variances would be least controllable by a
production supervisor?
A. Overhead volume. B. Materials usage. C. Labor efficiency. D. Overhead efficiency.
21. The variance resulting from obtaining an output different from the one expected on the basis
of input is the:
A. mix variance
B. usage variance
C. yield variance
D. efficiency variance
22. 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?
A.
B.
C.
D.
Price variance
Unfavorable
Favorable
No effect
Favorable
Usage variance
Favorable
Unfavorable
Unfavorable
Favorable
23. Using the two-variance method for analyzing overhead, which of the following
contains both variable and fixed overhead elements?
A.
B.
C.
Controllable (Budget) Variance
Yes
Yes
Yes
Volume Variance
Yes
Yes
No
Efficiency Variance
Yes
No
No
variances
D.
No
No
No
24. Which of the following unfavorable variances is directly affected by the relative position of a
production process on a learning curve?
A. Materials mix.
B. Materials price. C. Labor rate.
D. Labor efficiency.
25. 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.
C. Volume variance.
B. Labor rate variance.
D. Labor spending variance.
26. A credit balance in the labor efficiency variance indicates that:
A. standard hours exceed actual hours
B. actual hours exceed standard hours
C. standard rate and standard hours exceed actual rate and actual hours
D. actual rate and actual hours exceed standard rate and standard hours
27. 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
28. In the analysis of standard cost variances, the item which receives the most diverse treatment
in accounting is
A. Direct labor cost
C. Direct material cost
B. Factory overhead cost
D. Variable cost.
29. When expenses estimated for the capacity attained differ from the actual expenses incurred,
the resulting balance is termed the
A. Activity variance.
C. Unfavorable variance.
B. Budget variance.
D. Volume variance.
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30. The total overhead variance is
A. The difference between actual overhead costs and budgeted overhead.
B. Based on actual hours worked for the units produced.
C. The difference between actual overhead costs and applied overhead.
D. The difference between budgeted overhead and applied overhead.
31. Management scrutinizes variances because
A. Management desires to detect such variances to be able to plan for promotions.
B. Management needs to determine the benefits foregone by such variances.
C. It is desirable under conventional knowledge on good management.
D. Management recognizes the need to know why variances happen to be able to make
corrective actions and fairly reward good performers.
32. 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.
33. The production volume variance occurs when using the
A. Absorption costing approach because of production exceeding the sales.
B. Absorption costing approach because production differs from that used in setting the
fixed overhead rate used in applying fixed overhead to production.
C. Variable costing approach because of sales exceeding the production for the period.
D. Variable costing approach because of production exceeding the sales for the period.
34. 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
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. exceeded denominator hours by 1,200.
B. fell short of denominator hours by 1,000. D. fell short of denominator hour by 1,200.
35. 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 and quantity differences for overhead costs.
B. Price differences for overhead costs
C. Quantity differences for overhead costs
D. Differences caused by production volume variation
36. Which of the following is the most probable reason a company would experience an
unfavorable labor rate variance and a favorable efficiency variance?
A. The mix of workers assigned to the particular job was heavily weighted toward the use of
higher-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 production schedule, workers from other production areas were assigned
to assist in this particular process.
D. Defective materials caused more labor to be used to product a standard unit.
37. The variable factory overhead rate under the normal volume, practical capacity, and expected
activity levels would be the
A. Same except for practical capacity
C. Same except for normal volume
B. Same except for expected capacity
D. Same for all three activity levels
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38. 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. Inadequately training and supervising the labor force.
C. Processing a large number of rush orders.
D. Producing more units than planned for in the master budget.
39. A debit balance in the labor efficiency variance indicates that
A. Standard hours exceed actual hours.
C. Standard rate exceeds actual rate.
B. Actual hours exceed standard hours.
D. Actual rate exceeds standard rate.
40. 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
Unfavorable
Favorable
Favorable
Unfavorable
Price
Favorable
Favorable
Unfavorable
Unfavorable
41. Which one of the following would not explain an adverse direct labor efficiency variance?
A. Poor scheduling of direct labor hours
B. Setting standard efficiency at a level that is too low
C. Unusually lengthy machine breakdowns
D. A reduction in direct labor training
42. 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 being substantially composed of fixed costs.
B. Overhead being substantially composed of variable costs.
C. Overhead costs being recorded as planned.
D. Products being simultaneously manufactured in single runs.
43. 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
Unchanged
Increased
Increased
Unchanged
44. The journal entry to record the direct materials quantity variance may be recorded
A. Only when direct materials are purchased
B. Only when direct materials are issued to production
C. Either (a) or (b)
D. When inventory is taken at the end of the year.
45. Overapplied factory overhead results when
A. A plant is operated at less than its normal capacity.
B. Factory overhead costs incurred are greater than the costs charged to production.
C. Factory overhead costs incurred are less than the costs charged to production.
D. Factory overhead costs incurred are unreasonably large in relation to the number of units
produced.
46. Standard costing will produce the same results as actual or conventional costing when
standard cost variances are distributed to
A. Cost of goods sold and inventories
C. An income or expense account
B. A balance sheet account
D. Cost of goods sold
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PROBLEMS
1. 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
B. P8,400 U
C. P9,000 F
D. P9,00 F
2. SUPER Co. at normal capacity, operates at 600,000 labor hours with standard labor rate of
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
B. P500,000
C. P750,000
D. P1,200,000
3. A defense contractor for a government space project has incurred $2,500,000 in actual design
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.
4. 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
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.
Calculate the standard cost of cloth per scarf that Hankies Unlimited should use in its cost
sheets.
A. P16.87
B. P17.76
C. P18.21
D. P17.30
5. ALPHA Co. uses a standard cost system. Direct materials statistics for the month of May,
19x7 are summarize below:
Standard unit price
P90.00
Actual units purchased
40,000
Standard units allowed for actual production
36,250
Materials price variance- favorable
P6,000
What was the actual purchase price per unit?
A. P75.00
B. P85.89
C. P88.50
D. P89.85
6. 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
used in November was
A. $2,500 U
B. $11,000 U
C. $12,500 U
D. $3,500 F
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7. The Porter Company has a standard cost system. In July the company purchased and used
22,500 pounds of direct material at an actual cost of $53,000; the materials quantity variance
was $1,875 Unfavorable; and the standard quantity of materials allowed for July production
was 21,750 pounds. The materials price variance for July was:
A. $2,725 F.
B. $2,725 U.
C. $3,250 F.
D. $3,250 U.
8. Cox Company's direct material costs for the month of January were as follows:
Actual quantity purchased
18,000 kilograms
Actual unit purchase price
$ 3.60 per kilogram
Materials price variance – unfavorable (based on purchases)
$ 3,600
Standard quantity allowed for actual production
16,000 kilograms
Actual quantity used
15,000 kilograms
For January there was a favorable direct material quantity variance of
A. $3,360.
B. $3,375.
C. $3,400.
D. $3,800.
9. JKL Company has a standard of 15 parts of component X costing P1.50 each. JKL
purchased 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.
B. 1,090 units.
C. 1,000 units
D. 1,160 units
10. The following direct labor information pertains to the manufacture of product Glu:
Time required to make one unit
2 direct labor hours
Number of direct workers
50
Number of productive hours per week, per worker
40
Weekly wages per worker
$500
Workers’ benefits treated as direct labor costs
20% of wages
What is the standard direct labor cost per unit of product Glu?
A. $30.
B. $24.
C. $15.
D. $12.
11. 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. P52,500
B. P60,000
C. P62,500
D. P70,000
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
B. $49,440 U
C. $49,440 F
42,000
41,200
$247,200
$3,840
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
standard direct labor rate was P28.00 per hour, but an unexpected labor shortage necessitated
the hiring of higher-paid workers for some jobs and had resulted in a rate variance of P800.
The actual direct labor rate was
A. P27.20 per hour B. P28.80 per hour C. P30.25 per hour D. P31.40 per hour
14. To improve productivity, ST. MICHAEL Corp. instituted a bonus plan where employees are
paid 75% of the time saved when production performance exceeds the standard level of
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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
3rd
4th
Total
ALAN
107
100
110
108
425
JOEL
104
110
115
115
444
ROMY
108
112
112
133
465
TONY
123
120
119
124
486
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.
15. 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
B. P2.63
C. P2.93
D. P3.02
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
B. $45,000
C. $55,000
$
5,000
10,000
20,000
100,000
80,000
D. $120,000
17. 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
volume of 50,000 direct labor hours, at a standard direct labor rate of $6 per hour. Actual
factory O/H amounted to $620,000, with actual direct labor cost of $325,000. For the year,
over-applied factory O/H was
A. $20,000
B. $25,000
C. $30,000
D. $50,000
18. 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. $12,000 over-absorbed.
B. $6,000 under-absorbed.
D. $12,000 under-absorbed.
19. 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
B. 22,000
C. 24,000
D. 23,000
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20. At the beginning of the year, Smith Inc. budgeted the following:
Units
Sales
Minus:
Total variable expenses
Total fixed expenses
Net income
10,000
$100,000
60,000
20,000
$ 20,000
Factory overhead:
Variable
$ 30,000
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?
A. 10,250.
B. 10,000.
C. 9,875.
D. 9,500.
21. 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
B. P11,075
C. P10,340
D. P10,400
22. Universal Company uses a standard cost system and prepared the following budget at normal
capacity for the month of January:
Direct labor hours
24,000
Variable factory O/H
$48,000
Fixed factory O/H
$108,000
Total factory O/H per DLH
$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.
B. $13,500 U.
C. $9,000 F.
D. $10,500 U.
23. ABC Company uses the equation P300,000 + P1.75 per direct labor hour to budget
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. P35,000 U.
B. P36,000 U.
C. P2,000 F
D. P3,000 F
24. 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. 18,750
B. 20,313
C. 17,590
D. 16,500
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25. TYD, Inc. reported the following data for 1996:
Actual hours
Denominator hours
Standard hours allowed for output
Fixed predetermined overhead rate
Variable predetermined overhead rate
TYD’s 1996 volume variance was
a. P60,000 which is neither favorable nor under-applied.
b. P60,000 favorable.
c. No volume variance.
d. P60,000 under-applied.
120,000
150,000
140,000
P6 per hour
P4 per hour
26. 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
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 U.
B. $6,000 F.
C. $12,000 U
D. $12,000 F.
27. Margolos, Inc. ends the month with a volume variance of $6,360 unfavorable. If budgeted
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. 32,424
B. 32,000
C. 31,687
D.
31,576
28. 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.
B. $102,400.
C. $100,000.
D. $98,600.
29. The following information is available from the Tyro Company:
Actual factory O/H
$15,000
Fixed O/H expenses, actual
$7,200
Fixed O/H expenses, budgeted
$7,000
Actual hours
3,500
Standard hours
3,800
Variable O/H rate per DLH
$2.50
Assuming that Tyro uses a three-way analysis of O/H variances, what is the spending
variance?
A. $750 F.
B. $750 U.
C. $950 F
D. $200 U
30. At Overland Company, maintenance cost is exclusively a variable cost that varies directly
with 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
machine-hours were actually worked during July, the budgeted maintenance cost per
machine-hour was:
A. $1.20.
B. $1.25.
C. $1.275.
D. $1.225.
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31. 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 unfavorable.
C. P500 favorable.
B. P2,000 favorable.
D. P2,000 unfavorable.
32. 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
variance was
A. $9,000 F.
B. $16,000 F.
C. 49,000 U.
D. $16,000 U.
Problems 33 and 34 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.
33. The actual factory overhead incurred in January was
A. P186,200
B. P188,500
C. P181,500
D. P103,500
34. The applied factory overhead in January was
A. P188,500
B. P183,800
C. P186,200
D. P103,500
Questions 35 & 36 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
35. For March, the variable overhead spending variance was:
A. $6,000 F.
B. $10,000 U.
C. $12,000 U.
D. $22,000 F.
36. For March, the fixed overhead volume variance was:
A. $96,000 U.
B. $96,000 F.
C. $80,000 U.
D. $80,000 F.
Questions 37 thru 39 are based on the following information.
The Murray Company makes and sells a single product. The company recorded the following
activity and cost data for May:
Number of units completed
45,000 units
Standard direct labor-hours allowed per unit of product
1.5 DLHS
Budgeted direct labor-hours (denominator activity)
72,000 DLHS
Actual fixed overhead costs incurred
$66,000
Volume variance
$4,275 U
The fixed portion of the predetermined overhead rate is $0.95 per direct labor-hour.
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37. The amount of fixed overhead contained in the company's overhead flexible budget for May
was:
A. $64,125.
B. $67,500.
C. $68,400.
D. $70,275.
38. The amount of fixed manufacturing overhead cost applied to work in process during May
was:
A. $61,725.
B. $62,700.
C. $42,750.
D. $64,125.
39. The fixed overhead budget variance for May was:
A. $2,400 U.
B. $2,400 F.
C. $6,000 U.
D. $6,000 F.
Questions 40 and 41 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.
40. The total materials price variance is
A. P2,791.25 F
B. P2,791,25 U
C. P13,781.25 F
D. P13,781.25 U
41. 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
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 per direct labor hour.
The flexible budget at the normal capacity activity level follows:
Direct materials
P 4,000
Direct labor
24,000
Fixed factory overhead
1,200
Indirect materials
1,000
Indirect labor
3,000
Other overhead
600
Total
P 33,800
Cost per unit
P 6.76
42. The cost per unit at 60% capacity is
A. P6.00
B. P6.50
C. P6.82
43. The total production cost for one month at 80% capacity is
A. P20,760
B. P21,500
C. P27,280
D. P6.92
D. P30,160
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ANSWER KEY
Theory
1. D
2. A
3. A
4. D
5. B
6. B
7. C
8. C
9. D
10. A
11. A
12. A
13. B
14. B
15. B
16. C
17. A
18. A
19. C
20. A
21. C
22. B
23. C
24. D
25. A
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
A
D
B
B
C
D
A
B
C
A
A
D
D
B
C
B
A
C
B
C
A
Problem
1. D
2. D
3. D
4. B
5. D
6. C
7. C
8. C
9. D
10. A
11. C
12. B
13. B
14. C
15. B
16. A
17. C
18. D
19. D
20. D
21. B
22. A
23. B
24. A
25. D
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
C
D
B
A
A
C
A
B
C
B
A
C
D
B
B
B
D
C
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