NORMAL COSTING
One-Way Variance
Actual Overhead
25. Hayward applies overhead at $5 per machine hour. During March it worked 10,000 hours and overapplied overhead
by $3,000. Actual overhead was (E)
a. $53,000.
c. $47,000.
b. $50,000.
d. none of the above.
L & H 10e
Applied Overhead
36. Gonzalez Company uses the equation $520,000 + $2 per direct labor hour to budget manufacturing overhead.
Gonzalez has budgeted 150,000 direct labor hours for the year. Actual results were 150,000 direct labor hours and
$817,500 total manufacturing overhead. The total overhead applied for the year is (E)
a. $300,000.
c. $817,500.
b. $520,000.
d. $820,000.
L & H 10e
37. Gonzales Company uses the equation $540,000 + $2 per direct labor hour to budget manufacturing overhead.
Gonzalez has budgeted 160,000 direct labor hours for the year. Actual results were 160,000 direct labor hours and
$857,500 total manufacturing overhead. The total overhead variance for the year is (E)
a. $2,500 favorable.
c. $2,500 unfavorable.
b. $12,500 favorable.
d. Some other number.
D, L & H 9e
Over-Applied
24. Spooner applies overhead based on direct labor cost. It had budgeted manufacturing overhead of $50,000 and
budgeted direct labor of $25,000. Actual overhead was $52,500, actual labor cost was $27,000. Overhead was (E)
a. overapplied by $1,500.
c. overapplied by $2,500.
b. overapplied by $2,000.
d. underapplied by $2,000.
L & H 10e
37. Gonzalez Company uses the equation $520,000 + $2 per direct labor hour to budget manufacturing overhead.
Gonzalez has budgeted 150,000 direct labor hours for the year. Actual results were 150,000 direct labor hours and
$817,500 total manufacturing overhead. The total overhead variance for the year is (E)
a. $2,500 favorable.
c. $2,500 unfavorable.
b. $12,500 favorable.
d. some other number.
L & H 10e
44. Antaya Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead.
Antaya has budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $388,000
fixed overhead, and $98,600 variable overhead. The total overhead variance for the year is (E)
a. $14,400
c. $37,200
b. $15,600
d. $30,000.
L & H 10e
1
.
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 (M)
a. $20,000
c. $30,000
b. $25,000
d. $50,000
AICPA 1186 II-29
30. Nil Co. uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. For
the year ended December 31, Nil's estimated manufacturing overhead was $600,000, based on an estimated
volume of 50,000 direct labor hours, at a direct labor rate of $6.00 per hour. Actual manufacturing overhead
amounted to $620,000, with actual direct labor cost of $325,000. For the year, manufacturing overhead was: (M)
A. overapplied by $20,000.
C. overapplied by $30,000.
B. underapplied by $22,000.
D. underapplied by $30,000.
G & N 10e
.
2
Watson Company uses a predetermined factory overhead application rate based on direct labor cost. Watson's
budgeted factory overhead was $756,000 based on a budgeted volume of 60,000 direct labor hours, at a standard
direct labor rate of $7.20 per hour. Actual factory overhead amounted to $775,000 with actual direct labor cost of
$450,000 for the year ended December 31. How much was Watson's overapplied factory overhead? (M)
A. $12,500
B. $18,000
C. $19,000
D. $37,000
Gleim
Under-Applied
3
. The Kelley Company uses a predetermined overhead rate of $9 per direct labor hour to apply overhead. During the
year, 30,000 direct labor hours were worked. Actual overhead costs for the year were $240,000. The overhead
variance is (E)
a. $27,000 overlapped
c. $30,000 underapplied
b. $26,670 underapplied
d. $24,000 overapplied
H&M
38. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead.
Bonds has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours,
$297,000 fixed overhead, and $194,500 variable overhead. The total overhead variance for the year is (E)
a. $1,000.
c. $35,000
b. $48,000.
d. $36,000.
L & H 10e
29. Malcolm Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing
overhead to jobs.
On September 1, the estimates for the month were:
Manufacturing overhead
$17,000
Direct labor hours
13,600
During September, the actual results were:
Manufacturing overhead
$18,500
Direct labor hours
12,000
The cost records for September will show:
G & N 10e
A. Overapplied overhead of $1,500.
C. Overapplied overhead of $3,500.
B. Underapplied overhead of $1,500.
D. Underapplied overhead of $3,500.
Actual Direct Labor Hours
30. Hoyt Company applies overhead at $6 per direct labor hour. In March Hoyt incurred overhead of $144,000. Underapplied overhead was $6,000. How many direct labor hours did TYV work? (E)
a. 25,000
c. 23,000
b. 24,000
d. 22,000
D, L & H 9e
.
4
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? (E)
A. 25,000
C. 24,000
B. 22,000
D. 23,000
RPCPA 1001
.
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? (M)
a. 32,424
c. 31,687
b. 32,000
d. 31,576
J.B. Romal
41. Pinnini Co. uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to
jobs. Last year, Pinnini Company incurred $225,000 in actual manufacturing overhead cost. The Manufacturing
Overhead account showed that overhead was overapplied $14,500 for the year. If the predetermined overhead rate
was $5.00 per direct labor hour, how many hours did the company work during the year? (M)
A. 45,000 hours
C. 42,100 hours
B. 47,900 hours
D. 44,000 hours
G & N 10e
42. Parsons Co. uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to
jobs. Last year Parsons incurred $250,000 in actual manufacturing overhead cost. The Manufacturing Overhead
account showed that overhead was overapplied in the amount of $12,000 for the year. If the predetermined
overhead rate was $8.00 per direct labor hour, how many hours were worked during the year? (M)
A. 31,250 hours
C. 32,750 hours
B. 30,250 hours
D. 29,750 hours
G & N 10e
Three-Way Variance
Variable Overhead Spending Variance
39. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead.
Bonds has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours,
$297,000 fixed overhead, and $194,500 variable overhead. The variable overhead spending variance for the year is
(E)
a. $2,000.
c. $47,000.
b. $3,000.
d. $48,000.
L & H 10e
29. Baxter Corporation's master budget calls for the production of 5,000 units of its product monthly. The master budget
includes indirect labor of $144,000 annually; Baxter considers indirect labor to be a variable cost. During the month
of April, 4,500 units of product were produced, and indirect labor costs of $10,100 were incurred. A performance
report utilizing flexible budgeting would report a spending variance for indirect labor of: (E)
A. $1,900 unfavorable.
C. $1,900 favorable.
B. $700 favorable.
D. $700 unfavorable.
G & N 10e
Fixed Overhead Budget Variance
40. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead.
Bonds has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours,
$297,000 fixed overhead, and $194,500 variable overhead. The fixed overhead budget variance for the year is (E)
a. $2,000.
c. $47,000.
b. $3,000.
d. $48,000.
L & H 10e
46. Antaya Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead.
Antaya has budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $388,000
fixed overhead, and $98,600 variable overhead. The fixed overhead budget variance for the year is (E)
a. $13,000.
c. $17,000.
b. $47,000
d. $30,000.
L & H 10e
Volume Variance
. 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? (M)
A. P35,000 unfavorable.
C. P2,000 favorable.
B. P36,000 unfavorable.
D. P3,000 favorable.
RPCPA 1001
41. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead.
Bonds has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours,
$297,000 fixed overhead, and $194,500 variable overhead. The fixed overhead volume variance for the year is (E)
a. $39,000.
c. $33,000.
b. $3,000.
d. $36,000.
L & H 10e
47. Antaya Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead.
Antaya has budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $388,000
fixed overhead, and $98,600 variable overhead. The fixed overhead volume variance for the year is (E)
a. $1,400.
c. $15,600.
b. $13,000.
d. $30,000.
L & H 10e
Fixed OH Budget Variance, Volume Variance & Variable OH Spending Variance
Over-(Under) Applied Overhead
34. Waldorf had a $10,000 unfavorable fixed overhead budget variance, a $6,000 unfavorable variable overhead
spending variance, and a $2,000 favorable volume variance. The total overhead was (E)
a. $14,000 overapplied.
c. $18,000 overapplied.
b. $14,000 underapplied.
d. $18,000 underapplied.
L & H 10e
Variable Overhead Spending Variance
35. Bacon had a $18,000 unfavorable volume variance, a $5,000 unfavorable fixed overhead budget variance, and
$12,000 total under-applied overhead. The variable overhead spending variance was (E)
a. $11,000 favorable.
c. $11,000 unfavorable.
b. $1,000 favorable.
d. $23,000 unfavorable.
D, L & H 9e
Fixed Overhead Budget Variance
32. Daly had a $9,000 favorable volume variance, a $7,500 unfavorable variable overhead spending variance, and
$6,000 total overapplied overhead. The fixed overhead budget variance was (E)
a. $4,500 favorable.
c. $4,500 unfavorable.
b. $8,000 favorable.
d. $8,000 unfavorable.
L & H 10e
141.ABC had a P28,000 favorable volume variance, a P25,000 unfavorable variable overhead spending variance, and
P12,000 total overapplied overhead. The fixed overhead budget variance was
a. P9,000 favorable.
c. P9,000 unfavorable.
b. P26,000 favorable.
d. P26,000 unfavorable.
Pol Bobadilla
49. Rhoda had a $2,000 favorable volume variance, a $7,000 unfavorable variable overhead spending variance, and
$3,000 total underapplied overhead. The fixed overhead budget variance was (E)
a. $2,000 favorable.
c. $2,000 unfavorable.
b. $8,000 favorable.
d. $8,000 unfavorable.
L & H 10e
16. XYZ had an $8,000 unfavorable volume variance, a $11,500 unfavorable variable overhead spending variance, and
$1,500 total underapplied overhead. The fixed overhead budget variance was (E)
a. $18,000 favorable.
c. $17,500 unfavorable.
b. $21,000 favorable.
d. $21,000 unfavorable.
L & H 10e
Volume Variance
50. Katrina Inc. had a $30,000 favorable fixed overhead budget variance, a $44,000 unfavorable variable overhead
spending variance, and $44,000 total underapplied overhead. The volume variance was (E)
a. $30,000 overapplied.
c. $58,000 overapplied.
b. $30,000 underapplied.
d. $58,000 underapplied.
L & H 10e
33. Acme had a $6,000 favorable fixed overhead budget variance, a $2,500 unfavorable variable overhead spending
variance, and $1,000 total overapplied overhead. The volume variance was (E)
a. $4,500 overapplied.
c. $2,500 overapplied.
b. $4,500 underapplied.
d. $2,500 underapplied.
L & H 10e
142.Acme had a P22,000 favorable fixed overhead budget variance, a P15,000 unfavorable variable overhead spending
variance, and P2,000 total overapplied overhead. The volume variance was
a. P13,000 overapplied
c. P5,000 overapplied
b. P13,000 underapplied
d. P5,000 underapplied
Pol Bobadilla
Comprehensive
Questions 38 through 41 are based on the following information.
D, L & H 9e
Alcatraz Company uses the equation $400,000 + $1.75 per direct labor hour to budget manufacturing overhead.
Alcatraz has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours, $397,000
fixed overhead, and $194,500 variable overhead.
38. The total overhead variance for the year is (M)
a. $2,000
c. $47,000
b. $3,000
d. $48,000
39. The variable overhead spending variance for the year is (M)
a. $2,000
c. $47,000
b. $3,000
d. $48,000
40. The fixed overhead budget variance for the year is (E)
a. $2,000
c. $47,000
b. $3,000
d. $48,000
41. The fixed overhead volume variance for the year is (M)
a. $2,000
c. $47,000
b. $3,000
d. $48,000
Questions 44 through 47 are based on the following information.
D, L & H 9e
Hughes Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Hughes
had budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $397,000 fixed
overhead, and $94,500 variable overhead.
44. The total overhead variance for the year is (M)
a. $2,700
c. $22,000
b. $10,700
d. $30,000
45. The variable overhead spending variance for the year is (M)
a. $2,700
c. $22,000
b. $10,700
d. $30,000
46. The fixed overhead budget variance for the year is (E)
a. $2,700
c. $22,000
b. $10,700
d. $30,000
47. The fixed overhead volume variance for the year is (M)
a. $1,400
c. $15,600
b. $13,000
d. $30,000
ACTIVITY-BASED COSTING
Questions 116 thru 120 are based on the following information.
Horngren
Munoz, Inc. produces a special line of plastic toy racing cars. Munoz, Inc. produces the cars in batches. To manufacture
a batch of the cars, Munoz, Inc. must set up the machines and molds. Setup costs are batch-level costs because they
are associated with batches rather than individual units of products. A separate Setup Department is responsible for
setting up machines and molds for different styles of car.
Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number
of setup-hours. The following information pertains to June 2004.
Actual Amounts
Static-budget Amounts
Units produced and sold
15,000
11,250
Batch size (number of units per batch)
250
225
Setup-hours per batch
5
5.25
Variable overhead cost per setup-hour
$40
$38
Total fixed setup overhead costs
$14,400
$14,000
5
.
Calculate the efficiency variance for variable setup overhead costs. (D)
a. $1,500 unfavorable
c. $975 unfavorable
b. $525 favorable
d. $1,500 favorable
6
.
Calculate the spending variance for variable setup overhead costs. (D)
a. $1,500 unfavorable
c. $975 unfavorable
b. $525 favorable
d. $1,500 favorable
7
.
Calculate the flexible-budget variance for variable setup overhead costs. (M)
a. $1,500 unfavorable
c. $975 unfavorable
b. $525 favorable
d. $1,500 favorable
8
.
Calculate the spending variance for fixed setup overhead costs. (E)
a. $3,200 unfavorable
c. $3,600 unfavorable
b. $400 unfavorable
d. $400 favorable
9
.
Calculate the production-volume variance for fixed setup overhead costs.(M)
a. $3,200 unfavorable
c. $3,600 unfavorable
b. $400 unfavorable
d. $400 favorable
STATIC BUDGET VARIANCE
Questions 48 thru 50 are based on the following information.
Horngren
Abernathy Corporation used the following data to evaluate their current operating system. The company sells items for
$10 each and used a budgeted selling price of $10 per unit.
Actual
Budgeted
Units sold
92,000 units
90,000 units
Variable costs
$450,800
$432,000
Fixed costs
$ 95,000
$100,000
10
. What is the static-budget variance of revenues?
a. $20,000 favorable
c. $2,000 favorable
b. $20,000 unfavorable
d. $2,000 unfavorable
11
. What is the static-budget variance of variable costs? (E)
a. $1,200 favorable
c. $20,000 favorable
b. $18,800 unfavorable
d. $1,200 unfavorable
12
. What is the static-budget variance of operating income? (E)
a. $3,800 favorable
c. $6,200 favorable
b. $3,800 unfavorable
d. $6,200 unfavorable
Questions 51 thru 53 are based on the following information.
Horngren
Bates Corporation used the following data to evaluate their current operating system. The company sells items for $10
each and used a budgeted selling price of $10 per unit.
Actual
Budgeted
Units sold
495,000 units
500,000 units
Variable costs
$1,250,000
$1,500,000
Fixed costs
$ 925,000
$ 900,000
13
. What is the static-budget variance of revenues?
a. $50,000 favorable
c. $5,000 favorable
b. $50,000 unfavorable
d. $5,000 unfavorable
14
. What is the static-budget variance of variable costs?
a. $200,000 favorable
c. $250,000 favorable
b. $50,000 unfavorable
d. $250,000 unfavorable
15
. What is the static-budget variance of operating income? (E)
a. $175,000 favorable
c. $225,000 favorable
b. $195,000 unfavorable
d. $325,000 unfavorable
FLEXIBLE BUDGET VARIANCE
Total Manufacturing Cost
Flexible Budget
16
. Aebi Corporation currently produces cardboard boxes in an automated process. Expected production per month is
20,000 units, direct-material costs are $0.60 per unit, and manufacturing overhead costs are $9,000 per month.
Manufacturing overhead is allocated based on units of production. What is the flexible budget for 10,000 and
20,000 units, respectively? (E)
a. $10,500; $16,500
c. $15,000; $21,000
b. $10,500; $21,000
d. none of the above
Horngren
17
. Hemberger Corporation currently produces baseball caps in an automated process. Expected production per
month is 20,000 units, direct material costs are $1.50 per unit, and manufacturing overhead costs are $23,000 per
month. Manufacturing overhead is allocated based on units of production. What is the flexible budget for 10,000
and 20,000 units, respectively? (E)
a. $26,500; $41,500
c. $38,000; $53,000
b. $26,500; $53,000
d. none of the above
Horngren
*.
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
The total production cost for one month at 80% capacity is (M)
a. P20,760
c. P27,280
b. P21,500
d. P30,160
RPCPA 1082
Questions 36-38 are based on the following information:
G & N 10e
Barrick Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Total
budgeted costs at 200,000 direct labor-hours are as follows:
Variable costs (total):
Packing supplies
$120,000
Indirect labor
$180,000
Fixed costs (total):
Utilities
$100,000
Rent
$ 40,000
Insurance
$ 20,000
36. The flexible budget for factory overhead would show that the variable factory overhead cost per direct labor-hour is:
A. $1.80.
C. $0.90.
B. $1.50.
D. $0.60.
37. At an activity level of 170,000 direct labor-hours, the flexible budget for factory overhead would show the budgeted
amount for utilities as:
A. $ 85,000.
C. $160,000.
B. $140,000.
D. $100,000.
38. If Barrick Company plans to operate at 190,000 direct labor-hours during the next period, the flexible budget would
show indirect labor costs of:
A. $171,000.
C. $114,000.
B. $180,000.
D. $270,000.
Questions 39-41 are based on the following information:
G & N 10e
Wicks Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Budgeted
costs at 100,000 direct labor-hours are as follows:
Variable costs (total):
Packing supplies
$70,000
Indirect labor
$90,000
Fixed costs (total):
Utilities
$50,000
Rent
$20,000
Insurance
$10,000
39. The flexible budget for factory overhead would show that the variable overhead per direct labor-hour is:
A. $1.90.
C. $0.90.
B. $1.60.
D. $0.70.
40. At an activity level of 70,000 direct labor-hours, the flexible budget would show the budgeted amount for utilities as:
A. $35,000.
C. $80,000.
B. $70,000.
D. $50,000.
41. If Wicks Company plans to operate at 90,000 direct labor-hours during the next period, the flexible budget would
show indirect labor costs of:
A. $144,000.
C. $90,000.
B. $63,000.
D. $81,000.
Manufacturing Cost Variance
18
. 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? (M)
A. $300,000 savings.
C. $500,000 savings.
B. $500,000 overrun.
D. $700,000 overrun.
CIA 0596 III-87
19
. A manufacturing firm planned to manufacture and sell 100,000 units of product during the year at a variable cost per
unit of $4.00 and a fixed cost per unit of $2.00. The firm fell short of its goal and only manufactured 80,000 units at
a total incurred cost of $515,000. The firm’s manufacturing cost variance was (D)
a. $85,000 favorable.
c. $5,000 favorable.
b. $35,000 unfavorable.
d. $5,000 unfavorable.
CMA 1293 3-25
Operating Income
Questions 116 and 117 are based on the following information.
CMA 0695 3-26 & 27
Clear Plus, Inc. manufactures and sells boxes of pocket protectors. The static master budget and the actual results for
May 1995 appear below.
Actual
Static Budget
Unit sales
12,000
10,000
Sales
$132,000
$100,000
Variable costs of sales
70,800
60,000
Contribution margin
61,200
40,000
Fixed costs
32,000
30,000
Operating income
$ 29,200
$ 10,000
20
. The operating income for Clear Plus, Inc. using a flexible budget for May 1995 is
a. $12,000
c. $30,000
b. $19,200
d. $18,000
21
. Which one of the following statements concerning Clear Plus, Inc.’s actual results for May 1995 is correct?
a. The flexible budget variance is $8,000 favorable.
b. The sales price variance is $32,000 favorable.
c. The sales volume variance is $8,000 favorable.
d. The fixed cost flexible budget variance is $4,000 favorable.
Comprehensive
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 74 THROUGH 77.
Horngren
The actual information pertains to the month of August. As part of the budgeting process Alloway’s Fencing Company
developed the following static budget for August. Alloway is in the process of preparing the flexible budget and
understanding the results.
Actual Results
Flexible Budget
Static Budget
Sales volume (in units)
# 20,000
# 25,000
Sales revenues
$1,000,000
$
$1,250,000
Variable costs
512,000
$
600,000
Contribution margin
488,000
$
650,000
Fixed costs
458,000
$ 450,000
Operating profit
$ 30,000
$
$ 200,000
22
. The flexible budget will report __________ for variable costs. (E)
a. $512,000
c. $480,000
b. $600,000
d. $640,000
23
. The flexible budget will report __________ for the fixed costs. (E)
a. $458,000
c. $360,000
b. $450,000
d. $572,500
24
. The flexible-budget variance for variable costs is (E)
a. $32,000 unfavorable.
c. $32,000 favorable.
b. $120,000 unfavorable.
d. $120,000 favorable.
77. The PRIMARY reason for low operating profits was (M)
a. the variable-cost variance.
b. increased fixed costs.
c. a poor management accounting system.
d. lower sales volume than planned.
STATIC BUDGET VS. FLEXIBLE BUDGET
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 78 THROUGH 82.
Horngren
Peters’ Company manufacturers tires. Some of the company's data was misplaced. Use the following information to
replace the lost data:
Actual
Flexible-Budget
Flexible
Sales-Volume
Static
Results
Variances
Budget
Variances
Budget
Units sold
#225,000
#225,000
#206,250
Revenues
$84,160
$2,000 F
(A)
$2,800 U
(B)
Variable
(C)
$400 U
$31,720
$4,680 F
$36,400
costs
Fixed costs
$16,560
$1,720 F
$18,280
0
$18,280
Operating
$35,480
(D)
$32,160
(E)
$30,280
income
78. What amounts are reported for revenues in the flexible-budget (A) and the static-budget (B), respectively? (E)
a. $82,160; $79,360
c. $84,960; $88,960
b. $82,160; $84,960
d. $84,960; $83,360
79. What are the actual variable costs (C)? (E)
a. $36,400
b. $32,120
c. $31,320
d. $27,040
80. What is the total flexible-budget variance (D)? (E)
a. $120 unfavorable
c. $680 favorable
b. $0
d. $3,320 favorable
81. What is the total sales-volume variance (E)? (E)
a. $7,480 unfavorable
c. $1,880 favorable
b. $2,800 unfavorable
d. $7,480 favorable
82. What is the total static-budget variance? (E)
a. $5,200 favorable
b. $3,320 favorable
c. $1,880 unfavorable
d. $1,880 favorable
STANDARD COST
Unit Cost
*. 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
The cost per unit at 60% capacity is (M)
a. P6.00
c. P6.82
b. P6.50
d. P6.92
RPCPA 1082
Standard Total Cost
6. Cascade Company, which has a $3 standard cost per unit and budgeted production at 1,000 units, actually
produced 1,200 units. Total standard cost for the period is
a. $3,000
b. $3,600
c. An amount that cannot be determined without knowing the variances for the period.
d. None of the above.
D, L & H 9E
MATERIALS VARIANCE
Standard DM Cost per Unit
21. RTW Co. manufactures a “one-size-fits-all” ready-to-wear outfit and uses a standard cost system. Each unit of
finished outfit contains two yards of fabric that cost P75 per yard. Based on experience, a 20% loss on fabric input
is incurred. For each unit of outfit, the standard materials cost is (E)
a. P150.00
c. P187.50
b. P180.00
d. P200.00
RPCPA 1094
25
. Dahl Co. uses a standard costing system in connection with the manufacture of a “one size fits all” article of clothing.
Each unit of finished product contains 2 yards of direct material. However, a 20% direct material spoilage calculated
on input quantities occurs during the manufacturing process. The cost of the direct material is $3 per yard. The
standard direct material cost per unit of finished product is (M)
a. $4.80
c. $7.20
b. $6.00
d. $7.50
AICPA adapted
26
. Fleece Company uses a standard-costing system in relation to its manufacture of scarves. Each finished scarf
contains 1.5 yards of direct materials. However, a 25% direct materials spoilage, which is calculated based on input
quantities, occurs during the manufacturing process. The cost of the direct materials is $2.00 per yard. The standard
direct materials cost per unit of finished product is (M)
A. $2.25
C. $3.75
B. $3.00
D. $4.00
Gleim
*.
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. (D)
a. P16.87
c. P18.21
b. P17.76
d. P17.30
RPCPA 0594
8. Alejo 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 (nyclin) 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
P21.00 per kilogram
Protet
P28.00 per kilogram
The total standard materials cost of 20 liters of the product is (D)
A. P1,043,20
B. P834.56
C. P1,304.00
D. P1,234.00
Pol Bobadilla
Material Price Variance
Based on Quantity Purchased
27
. Garland Company uses a standard cost system. The standard for each finished unit of product allows for 3 pounds
of plastic at $0.72 per pound. During December, Garland bought 4,500 pounds of plastic at $0.75 per pound, and
used 4,100 pounds in the production of 1,300 finished units of product. What is the materials purchase price
variance for the month of December? (E)
a. $117 unfavorable.
c. $135 unfavorable.
b. $123 unfavorable.
d. $150 unfavorable.
CMA Samp Q3-11
18. The standard price of a material is $2 per pound. The company bought 2,000 pounds at $1.90 per pound and used
1,700 pounds. Standard use was 1,800 pounds. The material price variance was (E)
a. $170 favorable.
c. $200 favorable.
b. $180 favorable.
d. $400 favorable.
D, L & H 9e
38. The standard usage for raw materials is 5 pounds at $4 per pound. ABC Company spent $13,940 in purchasing
3,400 pounds. ABC used 3,150 pounds to produce 600 units of finished product. The material price variance is (E)
a. $340 unfavorable.
c. $600 unfavorable.
b. $400 unfavorable.
d. $1,340 unfavorable.
D, L & H 9e
40. Last month 75,000 pounds of direct material were purchased and 71,000 pounds were used. If the actual purchase
price per pound was $0.50 more than the standard purchase price per pound, then the material price variance was:
(E)
a. $2,000 F.
c. $37,500 U.
b. $37,500 F.
d. $35,500 U.
G & N 9e
42. PRECISION Instruments established a standard cost for raw materials at P25 per unit. During the period just
ended, a total of 10,000 units were purchased of which 50% was at P24.70 each, 20% was at P24.90 each, and the
balance was at P25.60 each. The raw materials cost variance is a favorable (an unfavorable) (M)
a. P100
c. P(100)
b. P900
d. P(900)
RPCPA 1097
43. The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
8.3 grams
Standard price ........................
$19.15 per gram
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............
7,500 grams
Actual cost of materials purchased ....
$141,375
Actual materials used in production ...
7,100 grams
Actual output .........................
700 units
What is the materials price variance for the month? (E)
a. $2,250 F
c. $24,317 U
b. $7,540 U
d. $7,660 U
G & N 9e
38. Perkins Company, which has a standard cost system, had 500 pounds of raw material X in its inventory at June 1,
purchased in May for $1.20 per pound and carried at a standard cost of $1.00 per pound. The following information
pertains to raw material X for the month of June:
Actual pounds purchased
1,400
Actual pounds used
1,500
Standard pounds allowed for actual production
1,300
Standard cost per pound
$1.00
Actual cost per pound
$1.10
The unfavorable materials purchase price variance for raw material X for June was:
A. $ 0.
C. $140.
B. $130.
D. $150.
G & N 10e
40. The following materials standards have been established for a particular product:
Standard quantity per unit of output
5.3 meters
Standard price
$17.20 per meter
The following data pertain to operations concerning the product for the last month:
Actual materials purchased
8,100 meters
Actual cost of materials purchased
$141,345
Actual materials used in production
7,600 meters
Actual output
1,400 units
What is the materials price variance for the month?
A. $3,141 U
C. $8,600 U
B. $2,025 U
D. $8,725 U
G & N 10e
Questions 1 & 2 are based on the following information.
The Max Company has developed the following standards for one of its products:
Direct materials:
15 pounds x $16 per pound
Direct labor:
4 hours x $24 per hour
Variable manufacturing overhead:
4 hours x $14 per hour
The following activity occurred during the month of October:
Materials purchased:
10,000 pounds costing $170,000
Materials used:
7,200 pounds
Units produced:
500 units
Direct labor:
2,300 hours at $23.60/hour
Actual variable manufacturing overhead:
$30,000
The company records materials price variances at the time of purchase.
. The variable standard cost per unit is (E)
a. $392
b. $336
c. $296
d. $152
. The direct materials price variance is (E)
a. $50,000 favorable
b. $50,000 unfavorable
c. $10,000 unfavorable
d. $10,000 favorable
H&M
28
29
Based on Quantity Purchased and Used
30
. The standard direct material cost to produce a unit of Lem is 4 meters of material at $2.50 per meter. During
May 2001, 4,200 meters of material costing $10,080 were purchased and used to produce 1,000 units of Lem.
What was the material price variance for May 2001? (E)
a. $400 favorable.
c. $80 unfavorable.
b. $420 favorable.
d. $480 unfavorable.
AICPA 1195
. Data regarding Mill Company's direct materials costs is as follows:
Actual unit cost
$2.00
Standard unit cost
2.20
Actual quantity purchased and used
28,000 units
Standard units of materials per unit of finished goods
3 units
31
Actual output of finished goods
9,000 units
What is the direct materials price variance? (E)
A. $2,800 favorable.
C. $5,600 favorable.
B. $5,600 unfavorable.
D. $2,200 unfavorable.
Gleim
Actual Price
47. 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? (M)
a. P75.00
c. P88.50
b. P85.89
d. P89.85
RPCPA 0597
32
. Information on Kennedy Company's direct material costs follows:
Standard price per pound of raw materials .......
$3.60
Actual quantity of raw materials purchased ......
1,600 pounds
Standard quantity allowed for actual production..
1,450 pounds
Materials purchase price variance--favorable ....
$ 240
What was the actual purchase price per unit, rounded to the nearest penny? (M)
a. $3.06.
c. $3.45.
b. $3.11.
d. $3.75.
AICPA adapted
41. The Wright Company has a standard costing system. The following data are available for September:
Actual quantity of direct materials purchased
25,000 pounds
Standard price of direct materials
$2 per pound
Material price variance
$2,500 unfavorable
The actual price per pound of direct materials purchased in September is:
A. $1.85.
C. $2.10.
B. $2.00.
D. $2.15.
G & N 10e
Actual Purchases
17. Cascade Company bought 10,000 pounds of material and used 9,500. The material price variance was $300
unfavorable and the standard price per pound is $3. The cost of materials purchased was (E)
a. $28,200
c. $29,700
b. $28,800
d. $30,300
D, L & H 9e
Standard Price
33
. During December, 6,000 pounds of raw materials were purchased at a cost of $16 per pound. If there was an
unfavorable direct materials price variance of $6,000 for December, the standard cost per pound must be (E)
a. $17
c. $15
b. $16
d. $14
H&M
42. The standard cost card for one unit of a certain finished product shows the following:
Standard Quantity or
Standard Price or Rate
Hours
Direct materials
10 pounds
$ ? per pound
Direct labor
2.5 hours
$16 per hour
Variable manufacturing overhead
1.5 hours
$10 per hour
If the total standard variable cost for one unit of finished product is $85, then the standard price per pound for direct
materials is: (M)
A. $1.74.
B. $4.60.
C. $5.90.
D. $3.00.
G & N 10e
Material Quantity Variance
37. 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: (M)
a. $3,360.
c. $3,400.
b. $3,375.
d. $3,800.
G & N 9e
Materials Quantity Variance
Actual Quantity Used
34
. During April, 80,000 units were produced. The standard quantity of material allowed per unit was 2 pounds at a
standard cost of $5 per pound. If there was a favorable usage variance of $40,000 for April, the actual quantity of
materials used must have been (M)
a. 168,000 pounds
c. 84,000 pounds
b. 152,000 pounds
d. 76,000 pounds
H&M
. During April, 20,000 units were produced. The standard quantity of material allowed per unit was 4 pounds at a
standard cost of $6 per pound. If there was an unfavorable usage variance of $30,000 for April, the actual quantity
of materials used must be (M)
a. 85,000 pounds
c. 21,250 pounds
b. 75,000 pounds
d. 18,750 pounds
H&M
35
36
. 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 units of material used to produce
November output totaled (M)
a. 12,000 units
c. 23,000 units
b. 12,500 units
d. 25,000 units
CMA 1293 3-23
Actual Price
44. The Swenson Company has a standard costing system. The following data are available for June:
Actual quantity of direct materials purchased
35,000 pounds
Standard price of direct materials
$4 per pound
Material price variance
$7,000 unfavorable
Material quantity variance
$4,200 favorable
The actual price per pound of direct materials purchased in June is: (M)
A. $3.92.
C. $4.08.
B. $4.32.
D. $4.20.
G & N 10e
Standard Quantity Allowed
45. The Fletcher 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
$2 per pound
Material quantity variance
$1,000 favorable
The standard quantity of material allowed for October production is: (M)
a. 23,000 lbs.
c. 24,500 lbs.
b. 24,000 lbs.
d. 25,000 lbs.
G & N 9e
43. The Cox Company uses standard costing. The following data are available for April:
Actual quantity of direct materials used
12,200 gallons
Standard price of direct materials
$4 per gallon
Material quantity variance
$2,000 unfavorable
The standard quantity of material allowed for April production is: (M)
A. 14,200 gallons.
C. 11,700 gallons.
B. 12,700 gallons.
D. 10,200 gallons.
G & N 10e
Standard Unit Cost
37
. 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. ChemKing’s standard price for one unit of
material is (E)
a. $2.50
c. $5.00
b. $3.00
d. $6.00
CMA 1293 3-22
Materials Quantity Variance
39. The standard usage for raw materials is 5 pounds at $4.00 per pound. ABC Company spent $13,940 in purchasing
3,400 pounds. ABC used 3,150 pounds to produce 600 units of finished product. The material quantity variance is
(E)
a. $340 unfavorable.
c. $600 unfavorable.
b. $400 unfavorable.
d. $1,340 unfavorable.
D, L & H 9e
36. Home Company manufactures tables with vinyl tops. The standard material cost for the vinyl used per Type-R table
is $7.80 based on six square feet of vinyl at a cost of $1.30 per square foot. A production run of 1,000 tables in
January resulted in usage of 6,400 square feet of vinyl at a cost of $1.20 per square foot, a total cost of $7,680. The
quantity variance resulting from the above production run was: (E)
A. $120 favorable.
C. $520 unfavorable.
B. $480 unfavorable.
D. $640 favorable.
G & N 10e
38
. A company uses a standard cost system to account for its only product. The materials standard per unit was 4 lbs.
at $5.10 per lb. Operating data for April were as follows:
Material used
7,800 lbs.
Cost of material used
$40,950
Number of finished units produced
2,000
The material usage variance for April was: (E)
A. $1,020 favorable
C. $1,170 unfavorable
B. $1,050 favorable
D. $1,200 unfavorable
CIA adapted
41. During March, Younger Company's direct material costs for product T were as follows:
Actual unit purchase price
$6.50 per meter
Standard quantity allowed for actual production
2,100 meters
Quantity purchased and used for actual production
2,300 meters
Standard unit price
$6.25 per meter
Younger's material quantity variance for March was: (E)
a. $1,250 unfavorable.
c. $1,300 unfavorable.
b. $1,250 favorable.
d. $1,300 favorable.
AICPA adapted
42. The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
1.7 meters
Standard price ........................
$19.80 per meter
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............
5,800 meters
Actual cost of materials purchased ....
$113,680
Actual materials used in production ...
5,100 meters
Actual output .........................
What is the materials quantity variance for the month? (E)
a. $13,720 U
c. $13,860 U
b. $6,732 F
d. $6,664 F
3,200 units
G & N 9e
39. The following materials standards have been established for a particular product:
Standard quantity per unit of output
4.6grams
Standard price
$15.05 per gram
The following data pertain to operations concerning the product for the last month:
Actual materials purchased
3,100 grams
Actual cost of materials purchased
$44,020
Actual materials used in production
2,400 grams
Actual output
300 units
What is the materials quantity variance for the month? (E)
A. $9,940 U
C. $14,484 U
B. $15,351 U
D. $10,535 U
G & N 10e
Direct Materials Price Variance
39
. 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 (M)
a. $2,500 unfavorable.
c. $12,500 unfavorable.
b. $11,000 unfavorable.
d. $3,500 favorable.
CMA 1293 3-24
39. Information on Fleming Company's direct material costs follows:
Actual amount of direct materials used ......
20,000 pounds
Actual direct material costs ................
$40,000
Standard price of direct materials ..........
$2.10 per pound
Direct material efficiency variance--favorable
$3,000
What was the company's direct material price variance? (M)
a. $1,000 favorable.
c. $2,000 favorable.
b. $1,000 unfavorable.
d. $2,000 unfavorable.
AICPA adapted
*. Information on the direct material costs of Bernal Manufacturing Corp. is as follows:
Actual direct material costs
P 44,000
Actual units of direct material used
22,000
Standard price per unit of direct material
P2.20
Direct material efficiency variance-unfavorable
P2,800
What was Bernal’s direct material price variance? (M)
a. P4,400 favorable.
c. P5,600 favorable.
b. P4,400 unfavorable.
d. P5,600 unfavorable.
RPCPA 1079
40
. Information on Duke Co.'s direct material costs for May is as follows:
Actual quantity of direct materials purchased and used
30,000lbs.
Actual cost of direct materials
$84,000
Unfavorable direct materials usage variance
3,000
Standard quantity of direct materials allowed for May production
29,000 lbs.
For the month of May, Duke's direct materials price variance was: (M)
A. $2,800 favorable
C. $6,000 unfavorable
B. $2,800 unfavorable
D. $6,000 favorable
23. Information on Energy’s direct material costs for October is as follows:
Actual quantity of direct materials purchased and used
30,000 lbs.
Carter & Usry
Actual cost of direct materials
Unfavorable direct materials usage variance
Standard quantity of direct materials allowed for May production
P92,000
P 3,000
29,000 lbs
For the month of October, Energy’s direct materials price variance was:
a. P3,000 favorable
c. P2,000 unfavorable
b. P2,000 favorable
d. P2,000 favorable
Pol Bobadilla
38. 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: (D)
a. $2,725 F.
c. $3,250 F.
b. $2,725 U
d. $3,250 U.
G & N 9e
Materials Price & Quantity Variance - Given
Actual Cost
Questions 114 thru 116 are based on the following information.
Horngren
Hector’s Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the
variances. F denotes a favorable variance and U denotes an unfavorable variance.
Variances
Flexible Budget
Price
Efficiency
Material A
$20,000
$1,000U
$1,200F
Material B
30,000
500F
800U
Material C
40,000
1,400U
1,000F
41
. The actual amount spent for Material A was (E)
a. $18,800.
c. $19,800.
b. $20,200.
d. $21,000.
42
. The actual amount spent for Material B was (E)
a. $29,700.
c. $30,500.
b. $30,800.
d. $30,300.
116. The explanation that lower-quality materials were purchased is MOST likely for (M)
a. Material A.
c. Material C.
b. Material B.
d. both Material A and C.
Standard Quantity Allowed
41. Acme has a standard price of $6 per pound for materials. July’s results showed an unfavorable materials price
variance of $44 and a favorable quantity variance of $228. If 1,066 pounds were used in production, what was the
standard quantity allowed for materials? (M)
a. 1,066
c. 1,294
b. 1,104
d. Some other number.
D, L & H 9e
Actual Units Produced
. 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?
(M)
A. 994 units.
C. 1,000 units
B. 1,090 units.
D. 1,160 units
RPCPA 1001
40. Acme has a standard of 15 parts of component X costing $1.50 each. Acme purchased 14,910 units of X for $21,
950. Acme generated a $415 favorable price variance and a $3,735 favorable quantity variance. If there were no
changes in the component inventory, how many units of finished product were produced? (M)
a. 994 units.
c. 1,160 units.
b. 1,000 units.
d. Some other number.
D, L & H 9e
Materials Price & Quantity Variances
44. If the current material standard calls for the use of 100,000 units at P1.00 each, but the actual usage was 105,000
units at P0.90 each, the variances to be explained are (E)
RPCPA 0596
a.
b.
c.
d.
Price Variance
P10,000 fav
P10,000 unfav P10,500 fav
P10,500 unfav
Quantity Variance
P 4,500 unfav
P4,500 fav
P5,000 unfav
P5,000 fav
43
. A company producing a single product employs the following direct material cost standard for each unit of output:
3 pounds of material x $4/pound = $12/output unit
Data regarding the operations for the current month are as follows:
Planned production
26,000 units
Actual production
23,000 units
Actual purchases of direct materials (75,000 pounds)
$297,000
Direct materials used in production
70,000 pounds
A.
B.
C.
D.
What would be the amount of the direct materials purchase price variance and direct materials quantity variance that
the company would recognize for the month?(E)
CIA 1191 IV-16
Purchase Price Variance
Quantity Variance
$3,120 favorable
$32,000 favorable
$3,000 favorable
$24,000 unfavorable
$3,000 favorable
$4,000 unfavorable
$2,800 favorable
$4,000 unfavorable
37. Throop Company's standards call for one kilogram of materials for each unit of output at a cost of $2 per kilogram
for the raw materials. Actual output was 50,000 units of product requiring 45,000 kilograms of raw materials at a cost
of $2.10 per kilogram. There were no beginning or ending inventories of raw materials. The direct material price
variance and quantity variance were:
G & N 10e
Price
Quantity
A.
$ 4,500 unfavorable
$10,000 favorable
B.
$ 5,000 favorable
$10,500 unfavorable
C.
$ 5,000 unfavorable
$10,500 favorable
D.
$10,000 favorable
$ 4,500 unfavorable
Questions 17 and 18 are based on the following information.
CMA 0695 3-23 & 24
Blaster Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a
complete radio. Each radio requires three units each of Part XBEZ52 which has a standard cost of $1.45 per unit.
During May 1995, Blaster experienced the following with respect to Part XBEZ52.
Units
Purchases ($18,000)
12,000
Consumed in manufacturing
10,000
Radios manufactured
3,000
44
. During May 1995, Blaster Inc. incurred a purchase price variance of (E)
a. $450 unfavorable.
c. $500 favorable.
b. $450 favorable.
d. $600 unfavorable.
45
. During May 1995, Blaster Inc. incurred a materials price efficiency variance of (E)
a. $1,450 unfavorable.
c. $4,350 unfavorable.
b. $1,450 favorable.
d. $4,350 favorable.
Questions 13 and 14 are based on the following information.
CIA 1192 IV-20 & 21
A manufacturer has the following direct materials standard for one of its products.
Direct materials: 3 pounds @ $1.60/pound = $4.80
The company records all inventory at standard cost. Data for the current period regarding the manufacturer's budgeted
and actual production for the product as well as direct materials purchases and issues to production for manufacture of
the product are presented as follows.
Budgeted production for the period
8,000 units
Actual production for the period
7,500 units
Direct materials purchases:
Pounds purchased
25,000 pounds
Total cost
$38,750
Direct materials issued to production
23,000 pounds
46
. The direct materials price variance for the current period is (E)
A. $1,125 favorable.
C. $1,200 favorable.
B. $1,150 favorable.
D. $1,250 favorable.
47
. The materials efficiency variance for the current period is (E)
A. $775 unfavorable.
C. $1,600 favorable.
B. $800 unfavorable.
D. $3,200 favorable.
Questions 15 and 16 are based on the following information.
CIA 1196 III-80 & 81
A company manufactures a product that has the direct materials, standard cost presented below. Budgeted and actual
information for the current month for the manufacture of the finished product and the purchase and use of the direct
materials is also presented.
Standard cost for direct materials – 1.60 lbs. @ $2.50 per lb. = $4.00
Budget
Actual
Finished goods (in units)
30,000
32,000
Direct materials usage (in pounds)
48,000
51,000
Direct materials purchases (in pounds)
48,000
50,000
Total cost of direct materials purchases
$120,000
$120,000
48
. The direct materials price variance for the current month is (E)
a. $7,500 unfavorable.
c. $5,000 favorable.
b. Zero.
d. $5,100 favorable.
49
. The direct materials efficiency variance for the current month is (E)
a. $500 favorable.
c. $7,500 unfavorable.
b. $3,000 favorable.
d. $8,000 unfavorable.
Questions 19 and 20 are based on the following information.
RPCPA 1083
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.
*. The total materials price variance is (M)
a. P2,791.25 favorable
c. P13,781.25 favorable
b. P2,791,25 unfavorable
d. P13,781.25 unfavorable
*.
The total materials quantity variance is (M)
a. P7,656.25 favorable
b. P7,656.25 unfavorable
c. P13,781.25 favorable
d. P13,781.25 unfavorable
Questions 74-75 are based on the following information:
G & N 10e
The following materials standards have been established for a particular product:
Standard quantity per unit of output
8.7 grams
Standard price
$15.30 per gram
The following data pertain to operations concerning the product for the last month:
Actual materials purchased
3,900 grams
Actual cost of materials purchased
$56,550
Actual materials used in production
3,600 grams
Actual output
400 units
74. What is the materials price variance for the month?
A. $2,880 F
C. $2,880 U
B. $3,120 U
D. $3,120 F
75. What is the materials quantity variance for the month?
A. $1,740 U
C. $4,590 U
B. $4,350 U
D. $1,836 U
Questions 76-77 are based on the following information:
G & N 10e
The following materials standards have been established for a particular product:
Standard quantity per unit of output
3.2 feet
Standard price
$10.10 per feet
The following data pertain to operations concerning the product for the last month:
Actual materials purchased
5,900 feet
Actual cost of materials purchased
$60,475
Actual materials used in production
5,400 feet
Actual output
1,400 units
76. What is the materials price variance for the month?
A. $885 U
C. $885 F
B. $810 U
D. $810 F
77. What is the materials quantity variance for the month?
A. $5,050 U
C. $9,292 U
B. $5,125 U
D. $9,430 U
Questions 85 & 86 are based on the following information.
G & N 9e
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
4.4 pounds
Standard price ........................
$13.20 per pound
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............
4,800 pounds
Actual cost of materials purchased ....
$62,880
Actual materials used in production ...
4,300 pounds
Actual output .........................
700 units
85. What is the materials price variance for the month? (E)
a. $480 F
c. $430 U
b. $430 F
d. $480 U
86. What is the materials quantity variance for the month? (E)
a. $6,550 U
c. $16,104 U
b. $15,982 U
d. $6,600 U
Questions 87 thru 88 are based on the following information.
G & N 9e
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
1.9 grams
Standard price ........................
$18.00 per gram
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............
5,800 grams
Actual cost of materials purchased ....
$108,460
Actual materials used in production ...
5,200 grams
Actual output .........................
2,700 units
87. What is the materials price variance for the month? (E)
a. $4,060 U
c. $3,640 U
b. $3,640 F
d. $4,060 F
88. What is the materials quantity variance for the month? (E)
a. $1,260 U
c. $11,220 U
b. $1,309 U
d. $10,800 U
Questions 89 & 90 are based on the following information.
G & N 9e
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
6.8 meters
Standard price ........................
$17.10 per meter
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............
9,000 meters
Actual cost of materials purchased ....
$156,600
Actual materials used in production ...
8,500 meters
Actual output .........................
1,200 units
89. What is the materials price variance for the month? (E)
a. $2,700 F
c. $2,550 F
b. $2,550 U
d. $2,700 U
90. What is the materials quantity variance for the month? (E)
a. $5,814 U
c. $5,916 U
b. $8,700 U
d. $8,550 U
Questions 1 & 2 are based on the following information.
H&M
Assume that the standard cost to make one widget includes 5 units of raw materials at a price of $3 per unit. In July,
17,000 units of raw materials were purchased for $50,400, and 10,400 units of raw materials were used to produce
2,000 units of finished product. The material price variance is recorded at the time of purchase.
. What is the materials price variance for July? (E)
a. $2,400 (U)
d. $400 (U)
b. $600 (F)
e. $600 (U)
c. $1,200 (U)
50
. What is the materials usage variance? (E)
a. $1,200 (U)
b. $400 (U)
c. $600 (F)
51
d. $600 (U)
e. $0
Questions 1 and 2 are based on the following information.
Flamholtz & Diamond
Gazarra Company has supplied you with the following data relating to the material required to manufacture mini-ringnickers:
Standard price per ounce of material
$1.25
Standard quantity of material per mini-ring-nicker
4 oz.
Actual material purchased
2,800 oz.
Actual material used in production
2,200 oz.
Actual mini-ring-nickers produced
Actual cost of material purchased
520 units
$3,920
.
If Gazarra had planned to produce a total of 550 mini-ring-nickers during the year, its material price variance was (E)
A. $330 unfavorable.
D. $78 unfavorable.
B. $420 unfavorable.
E. $0.15 unfavorable.
C. $770 unfavorable.
.
If Gazarra had planned to produce a total of 360 moni-ring-nickers during the year, its material quantity variance
was (E)
A. $200 unfavorable.
D. $1,008 unfavorable.
B. $900 unfavorable.
E. $168 unfavorable.
C. $150 unfavorable.
Questions 82 through 84 are based on the following information.
Barfields
Kauai Mfg. Co. produces beach chairs. Chair frames are all the same size, but can be made from plastic, wood, or
aluminum. Regardless of frame choice, the same sailcloth is used for the seat on all chairs. Kauai has set a standard for
sailcloth of $9.90 per square yard and each chair requires 1 square yard of material. Kauai produced 500 plastic chairs,
100 wooden chairs, and 250 aluminum chairs during June. The total cost for 1,000 square yards of sailcloth during the
month was $10,000. At the end of the month, 50 square yards of sailcloth remained in inventory.
82. The unfavorable material price variance for sailcloth purchases for the month was (E)
a. $100.
c. $1,090.
b. $495.
d. $1,585.
83. Assuming that there was no sailcloth in inventory at the beginning of June, the unfavorable material quantity
variance for the month was (E)
a. $495.
c. $990.
b. $500.
d. $1,000.
84. Kauai Mfg. Co. could set a standard cost for which of the following? (E)
a.
b.
c.
Frame cost
Yes
No
Yes
Predetermined OH rate
Yes
No
No
Labor rate
Yes
No
No
d.
No
Yes
Yes
Standard Quantity & Materials Usage Variance
Questions 1 & 2 are based on the following information.
H&M
Sexson Corporation uses a standard cost system. The following information pertains to direct materials for the month of
May.
Standard price per lb.
$12.00
Actual purchase price per lb.
$11.00
Quantity purchased
6,200 lbs.
Quantity used
5,900 lbs.
Standard quantity allowed for actual output
6,000 lbs.
Actual output
1,000 units
Sexson reports its material price variances at the time of purchase.
. What is the standard quantity of direct materials per unit for Sexson Corporation? (E)
a. 7.00 lbs.
d. 5.90 lbs.
b. 6.50 lbs.
e. 6.00 lbs.
c. 6.20 lbs.
52
. What is the material usage variance for Sexson Corporation? (E)
a. $1,200 (F)
d. $1,200 (U)
53
H&M
b. $2,600 (F)
c. $3,800 (F)
e. $6,200 (F)
Questions 1 thru 3 are based on the following information.
The cost accountant for Hando Company has just informated you that the company’s material quantity variance was
exactly equal to the company’s material price variance for the year. The company had expected to produce 450 units of
its product. However, because of a slump in the economy, it was only able to justify the production of 400 units. Other
cost information relating to the company’s raw materials activity is shown below:
Standard price per ton of material
$ 50
Actual tons purchased during the period
10
Actual tons used in production during the period
8
Actual cost of material purchased during the period
$600
Number of pounds in 1 ton
2,000
.
The standard quantity of materials allowed for the number of units produced by Hando totaled
A. 6.4 tons.
C. 8.4 tons.
B. 8.0 tons.
D. 6.0 tons
.
Hando’s material quantity variance was
A. $80 unfavorable.
B. $80 favorable.
.
C. $100 unfavorable.
D. $100 favorable.
On the average, Hando used exceeded its standard materials allowed by
A. 20 pounds per unit produced.
D. 8 pounds per unit produced.
B. 18 pounds per unit produced.
E. 9 pounds per unit produced.
C. 10 pounds per unit produced.
Materials Mix & Yield Variance
Materials Quantity Variance
*. The material mix variance for a product is P500 unfavorable, and the material yield variance is P600 favorable. This
means that the material (M)
a. Price variance is P100 favorable.
b. Quantity variance is P100 favorable.
c. Price variance is unfavorable but the amount cannot be determined from the information given.
d. Quantity variance is P1,100.
RPCPA 1092
Materials Yield Variance
36. Slim 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
Standard Mix
Standard Cost per Pound
Input:
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
Synthetic wax
13,800
Colors
2,200
Scents
Total
Actual output
The material yield variance is
A. P280 unfavorable.
B. P280 favorable.
60
20,160
18,500
C. P3,989 unfavorable.
D. P3,989 favorable.
Pol Bobadilla
Materials Mix & Yield Variance
Questions 22 and 23 are based on the following information.
Gleim
The information was presented as part of Question 5 on Part 4 of the June 1992 CMA examination.
A company produces a gasoline additive. The standard costs and input for a 500-liter batch of the additive are
presented below.
Standard InputStandard Cost
Total
Chemical
Quantity in Liters
per Liter
Cost
Echol
200
$0.200
$ 40.00
Protex
100
0.425
42.50
Benz
250
0.150
37.50
CT-40
50
0.300
15.00
600
$135.00
The quantities purchased and used during the current period are shown below. A total of 140 batches were made during
the current period.
Quantity PurTotal
Quantity Used
Chemical
chased (Liters)
Purchase Price
(Liters)
Echol
25,000
$ 5,365
26,600
Protex
13,000
6,240
12,880
Benz
40,000
5,840
37,800
CT-40
7,500
2,220
7,140
85,500
$ 19,665
84,420
54
. What is the materials mix variance for the operation? (M)
a. $294 favorable.
c. $94.50 unfavorable.
b. $388.50 favorable.
d. $219.50 favorable.
55
. What is the materials yield variance for this operation? (M)
a. $294.50 favorable.
c. $94.50 unfavorable.
b. $388.50 favorable.
d. $219.50 favorable.
Questions xx thru xx are based on the following information.
H&M
Harrigan Corporation uses two materials in the production of their product. The materials, A and B, have the following
standards:
Material
Standard Mix
Standard Unit Price
Standard Cost
A
3,500 units
$1.00 per unit
$3,500
B
1,500 units
3.00 per unit
$4,500
Yield
4,000 units
During January, the following actual production information was provided:
Material
Actual Mix
A
30,000 units
B
20,000 units
Yield
36,000 units
56
. What is the materials mix variance? (M)
a. $5,000 (F)
c. $10,000 (F)
b. $10,000 (U)
d. $15,000 (F)
. What is the materials yield variance? (M)
a. $4,000 (F)
b. $8,000 (F)
c. $8,000 (U)
d. $9,000 (U)
. What is the materials usage variance? (M)
a. $10,000 (U)
b. $8,000 (U)
c. $8,000 (F)
d. $18,000 (U)
57
58
Materials Flexible Budget Variance
Questions 24 and 25 are based on the following information.
CMA 0697 3-22 & 23
The controller of Durham Skates is reviewing the production cost report for July. An analysis of direct materials costs
reflects an unfavorable flexible budget variance of $25. The plant manager believes this is excellent performance on a
flexible budget for 5,000 units of direct materials. However, the production supervisor is not pleased with this result
because he claims to have saved $1,200 in material cost on actual production using 4,900 units of direct materials. The
standard materials cost is $12 per unit. Actual materials used for the month amounted to $60,025.
59
. The actual average cost per unit for materials was (M)
a. $12.00
c. $12.24
b. $12.01
d. $12.25
. If the direct materials variance is investigated further, it will reflect a price variance of (M)
a. Zero.
c. $1,225 unfavorable.
b. $1,200 favorable.
d. $2,500 favorable.
60
Comprehensive
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 66 THROUGH 68.
Horngren
JJ White planned to use $82 of material per unit but actually used $80 of material per unit, and planned to make 1,200
units but actually made 1,000 units.
61
. The flexible-budget amount is (E)
a. $80,000.
b. $82,000.
c. $96,000.
d. $98,400.
62
. The flexible-budget variance is (E)
a. $2,000 favorable.
b. $14,000 unfavorable.
c. $16,400 unfavorable.
d. $2,400 favorable.
63
. The sales-volume variance is (E)
a. $2,000 favorable.
b. $14,000 unfavorable.
c. $16,400 unfavorable.
d. $2,400 favorable.
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 70 THROUGH 72.
Horngren
McKenna Incorporated planned to use $24 of material per unit but actually used $25 of material per unit, and planned to
make 1,000 units but actually made 1,200 units.
64
c. $28,800.
d. $30,000.
. The flexible-budget variance is (E)
a. $4,800 favorable.
b. $1,200 unfavorable.
c. $5,000 unfavorable.
d. $6,000 favorable.
65
. The flexible-budget amount is (E)
a. $24,000.
b. $25,000.
66
. The sales-volume variance is (E)
a. $4,800 favorable.
c. $5,000 unfavorable.
b. $1,200 unfavorable.
d. $6,000 favorable.
Questions 26 through 28 are based on the following information.
Gleim
A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio
requires three units each of Part X, which has a standard cost of $2.90 per unit. During June, the company had the
following experience with respect to Part X:
Units
Purchases ($36,000)
12,000
Consumed in manufacturing
10,000
Radios manufactured
3,000
67
. During June, the company incurred a materials purchase-price variance of (E)
a. $900 unfavorable.
c. $1,200 unfavorable.
b. $900 favorable.
d. $1,200 favorable.
68
. During June, the company incurred a materials efficiency variance of (E)
a. $2,900 unfavorable.
c. $8,700 unfavorable.
b. $2,900 favorable.
d. $8,700 favorable.
69
. The amount that will be shown on a flexible budget for Part X usage during the month of June is (E)
a. $26,100
c. $29,000
b. $27,000
d. $36,000
LABOR VARIANCES
Standard DL Time per Unit
84. Hansen 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 Protex.
 The finished product is highly unstable, and one 10-liter batch out of six if 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 eight hours a day,
including one hour per day for rest breaks and cleanups.
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.
Pol Bobadilla
Standard DL Cost per Unit
70
. 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? (M)
a. $30.
c. $15.
b. $24.
d. $12.
AICPA 0592 II-46
62. The following direct labor information pertains to the manufacturer of Part SARS:
Number of hours required to make a part
2.5 DLH
Number of direct workers
75
Number of total productive hours per week
3,000
Weekly wages per worker
P1,000
Laborer’s fringe benefits treated as direct labor costs
25% of wages
What is the standard direct labor cost per unit of Parts SARS? (M)
A. P62.500
C. P41.670
B. P78.125
D. P84.125
Pol Bobadilla
71
. Media Co. manufactures televisions. The following direct labor information relates to the manufacture of televisions.
Number of workers
60
Number of productive hours per week, per worker
40
Hours required to make 1 unit
3
Weekly wages per worker
$600
Employee benefits treated as direct labor costs
20% of wages
What is the standard direct labor cost per unit? (M)
A. $54
C. $30
B. $36
D. $18
Gleim
*.
Each unit of Product 8 in 1 requires two direct labor hours. Employee benefit costs are treated as direct labor costs.
Data on direct labor are as follows:
Number of direct employees
25
Weekly productive hours per employee
30
Estimated weekly wages per employee
$240
Employee benefits (related to weekly wages)
25%
The standard direct labor cost per unit of Product 8in1 is: (M)
A. $8.00
C. $12.00
B. $10.00
D. $20.00
CMA adapted
. Each unit of Product XK-46 requires three direct labor hours. Employee benefit costs are treated as direct labor
costs. Data on direct labor are
Number of direct employees
25
Weekly productive hours per employee
35
Estimated weekly wages per employee
$245
Employee benefits (related to weekly wages)
25%
72
The standard direct labor cost per unit of Product XK-46 is (M)
A. $21.00.
C. $29.40.
B. $26.25.
D. $36.75.
CMA 0684 4-26
Standard DLH Allowed
28. Hart Company's labor standards call for 500 direct labor hours to produce 250 units of product. During October the
company worked 625 direct labor hours and produced 300 units. The standard hours allowed for October would be:
(E)
a. 625 hours.
c. 600 hours.
b. 500 hours.
d. 250 hours.
G & N 9e
Total DL Variance
73
. The following is a standard cost variance analysis report on direct labor cost for a division of a manufacturing
company.
Job
Actual Hours at
Actual Hours at
Standard Hours at
Actual Wages
Standard Wages
Standard Wages
213
$3,243
$3,700
$3,100
215
15,345
15,675
15,000
217
6,754
7,000
6,600
219
19,788
18,755
19,250
221
3,370
3,470
2,650
Totals
$48,500
$48,600
$46,600
What is the total flexible budget direct labor variance for the division? (M)
a. $1,00 unfavorable.
c. $1,900 favorable.
b. $1,900 unfavorable.
d. $2,000 unfavorable.
CIA 0592 IV-18
DL Rate Variance
*. Below are FLX Corporation’s standard costs to produce one concrete table:
Direct raw materials
2 kgs.
P375 per kg.
Direct labor
30 minutes
P31.25 per hour
In September, FLX produced 250 concrete tables. 520 kgs. of raw materials were used at a total cost of P193,440.
A total of 128 direct labor hours were used at a cost of P4,096. The direct labor rate variance is (E)
a. P22.50
c. P64.75
b. P93.00
d. P96.00
RPCPA 1097
.
JKL Company is using a direct labor cost standard of 4 hours and a P12 wage rate per hour for one of its products.
Planned production was 300 units, but actual production was 250 units, using for each unit 3 labor hours at a P13
wage rate. What is the labor price variance? (M)
A. P750 unfavorable.
C. P1,200 favorable.
B. P900 unfavorable.
D. P750 favorable.
RPCPA 1001
42. Genco paid $39,400 to direct labor for the production of 1,500 units. Standards allow 2 labor hours per unit at a rate
of $12.50 per hour. Actual hours totaled 2,900. The direct labor rate variance was (E)
a. $1,250 favorable.
c. $3,150 unfavorable.
b. $3,150 favorable.
d. $1,900 unfavorable.
D, L & H 9e
42. Genco paid $78,800 to direct labor for the production of 1,500 units. Standards allow 2 labor hours per unit at a rate
of $25.00 per hour. Actual hours totaled 2,900. The direct labor rate variance was (E)
a. $2,050 favorable
c. $6,300 unfavorable
b. $3,800 favorable
d. some other number
L & H 10e
46. Chippewa paid $32,225 to direct labor for the production of 1,700 units. Standards allow 3 labor hours per unit at a
rate of $6.50 per hour. Actual hours totaled 5,150. The direct labor rate variance was (E)
a. $1,250 favorable.
c. $325 favorable.
b. $925 favorable.
d. $325 unfavorable.
D, L & H 9e
.
Blasto Company produces bug-bombs. Direct labor standards for the firm and actual data for the month of April are
shown below:
Standard labor rate per hour
$6
Standard hours allowed per bug-bomb
0.05
Actual bug-bombs produced in April
50,000
Actual labor costs for April
$17,400
Actual labor hours recorded for April
3,000
Blasto’s labor rate variance for April was (E)
A. $640 unfavorable.
B. $600 favorable.
C. $560 unfavorable.
D. $500 favorable.
Flamholtz & Diamond
48. The following labor standards have been established for a particular product:
Standard labor hours per unit of output ..
1.7 hours
Standard labor rate ......................
$14.05 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked ......................
3,700 hours
Actual total labor cost ..................
$50,690
Actual output ............................
2,300 units
What is the labor rate variance for the month? (E)
a. $1,295 F
c. $4,246 F
b. $2,877 F
d. $4,246 U
G & N 9e
47. The following labor standards have been established for a particular product:
Standard labor hours per unit of output
9.0 hours
Standard labor rate
$15.10 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked
8,100 hours
Actual total labor cost
$119,880
Actual output
800 units
What is the labor rate variance for the month?
A. $11,160 F
C. $11,160 U
B. $13,320 U
D. $2,430 F
G & N 10e
33. Operational statistics generated for the period just ended for APEX Manufacturing Co., maker of a line of furniture,
follow:
Standards per set:
Materials
2.0 yards @ P100
Direct labor
0.5 hour @ P200
Actual results:
Production
20,000 sets
Materials used
37,000 yards
Price per yard
P102
Direct labor hours used
9,000 hours
Direct labor cost
P1,764,000
The direct labor rate variance was (E)
a. P36,000 favorable
c. P40,000 favorable
b. P36,000 unfavorable
d. P40,000 unfavorable
RPCPA 1094
74
. The flexible budget for the month of May 1993 was for 9,000 units at a direct materials cost of $15 per unit. Direct
labor was budgeted at 45 minutes per unit for a total of $81,000. Actual output for the month was 8,500 units with
$127,500 indirect materials and $77,775 in direct labor expense. The direct labor standard of 45 minutes was
maintained throughout the month. Variance analysis of the performance for the month of May would show a(n) (E)
a. Favorable materials usage variance of $7,500.
b. Favorable direct labor efficiency variance of $1,275.
c. Unfavorable direct labor efficiency variance of $1,275.
d. Unfavorable direct labor price variance of $1,275.
CMA 0693 3-15
Actual Direct Labor Hours
. STA Company uses a standard cost system. The following information pertains to direct labor costs for the month of
June:
Standard direct labor rate per hour
P10.00
Actual direct labor rate per hour
P 9.00
Labor rate variance
P12,000 F
Actual output
2,000 units
Standard hours allowed for actual production
10,000 hours
How many actual labor hours were worked during March for STA Company? (M)
A. 10,000
C. 8,000
B. 12,000
D. 10,500
Pol Bobadilla
Actual Direct Labor Rate
52. The Reedy Company uses a standard costing system. The following data are available for November:
Actual direct labor hours worked ...
5,800 hours
Standard direct labor rate .........
$9 per hour
Labor rate variance ................
$1,160 favorable
The actual direct labor rate for November is: (M)
a. $8.80.
b. $8.90.
c. $9.00.
d. $9.20.
G & N 9e
51. The Hanson Company employs a standard costing system. The following data are available for February:
Actual direct labor hours worked
6,500
Standard direct labor rate
$8 per hour
Labor rate variance
$2,600 favorable
The actual direct labor rate for February is: (M)
A. $7.60.
C. $8.00.
B. $8.40.
D. $2.50.
G & N 10e
. During October, 14,000 direct labor hours were worked at a standard cost of $40 per hour. If the direct labor rate
variance for October was $70,000 favorable, the actual cost per direct labor hour must be (M)
a. $35
c. $45
b. $40
d. $50
H&M
75
. During October, 20,000 direct labor hours were worked at a standard cost of $5 per hour. If the direct labor rate
variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be (M)
a. $5.20
c. $4.80
b. $5.00
d. $4.60
H&M
76
Actual Direct Labor Hours & Actual Direct Labor Rate
Questions 87-88 are based on the following information:
G & N 10e
The auto repair shop of Empire Motor Sales uses standards to control labor time and labor cost in the shop. The
standard time for a motor tune-up is 2.5 hours. The record showing time spent in the shop last week on tune-ups has
been misplaced; however, the shop supervisor recalls that 50 tune-ups were completed during the week and the
controller recalls that the labor rate variance on tune-ups was $87, favorable. The shop has a set standard labor rate of
$9 per hour for tune-up work. The total labor variance for the week on tune-up work was $93, unfavorable.
87. The number of actual hours spent on tune-up work last week was:
A. 125 hours.
B. 105 hours.
C. 145 hours.
D. Cannot be computed without further information.
88. The actual hourly rate of pay for tune-up work last week was:
A. $8.40 per hour.
B. $9.00 per hour.
C. $9.60 per hour.
D. Cannot be computed without further information.
Actual Direct Labor Cost
77
. Sullivan Corporation’s direct labor costs for the month of March were as follows:
Standard direct labor hours
42,000
Actual direct labor hours
40,000
Direct labor rate variance – favorable
$8,400
Standard direct labor rate per hour
$6.30
What was Sullivan’s total direct labor payroll for the month of March? (M)
a. $243,600
c. $264,600
b. $252,000
d. $260,400
AICPA 1180 I-35
78
. Daniel Corporation's direct labor costs for June were as follows:
Actual direct labor hours
Standard direct labor hours
Direct labor rate variance – favorable
32,000
33,600
$6,720
Standard direct labor rate per hour
$5.04
Compute Daniel's total direct labor payroll for the month of June. (M)
A. $154,560
C. $167,680
B. $154,880
D. $168,000
Gleim
*. The following information related to the direct labor costs of Valley Mfg. Co., for the month of April 19x9:
Actual direct labor hours
57,000 hours
Standard direct labor hours
58,000 hours
Direct labor rate variance – favourable
P8,550
Standard direct labor rate per hour
P5.50
What was the total direct labor payroll of Valley Mfg. for the month of April 19x9? (M)
a. P310,300
c. P319,000
b. P322,050
d. P304,950
RPCPA 1089
Standard Direct Labor Rate
79
. Information on Hanley’s direct labor costs for the month of January is as follows:
Actual direct labor rate
$7.50
Standard direct labor hours allowed
11,000
Actual direct labor hours
10,000
Direct labor rate variance – favorable
$5,500
The standard direct labor rate in January was (E)
a. $6.95
c. $8.00
b. $7.00
d. $8.05
CPA 0582 I-25
80
. Lake's direct labor costs for the month of May are as follows:
Standard direct labor hours allowed
Actual direct labor rate
Actual direct labor hours
Direct labor rate variance – favorable
12,500
$8.25
10,000
$5,600
What was Lake's standard direct labor rate in May? (E)
A. $7.69
C. $8.25
B. $7.80
D. $8.81
Gleim
81
. Information on ABC Company’s direct labor costs for the month of August is as follows:
Actual direct labor rate
P7.50
Standard direct labor hours allowed
11,000
Actual direct labor hours
10,000
Direct labor price variance – unfavorable
P5,000
The standard direct labor rate in January was (E)
a. P8,05
c. P7.00
b. P6.95
d. P8.00
RPCPA 1001
49. Information on Hanley's direct labor costs for the month of January follows:
Actual direct labor rate
Standard direct labor hours allowed
Actual direct labor hours
Direct labor rate variance—favorable
What was the standard direct labor rate in effect for the month of January?
A. $6.95
C. $8.00
B. $7.00
D. $8.05
$7.50
11,000
10,000
$5,500
G & N 10e
DL Efficiency Variance
82
. Yola Co. manufactures one product with a standard labor cost of 4 hours at $12.00 per hour. During June 1,000
units were produced using 4,100 hours at $12.20 per hour. The unfavorable direct labor efficiency variance was (E)
a. $1,220
c. $820
b. $1,200
d. $400
AICPA 1192 II-21
46. Yola Company manufactures a product with standards for direct labor of 4 direct labor-hours per unit at a cost of
$12.00 per direct labor-hour. During June, 1,000 units were produced using 4,100 hours at $12.20 per hour. The
direct labor efficiency variance was: (E)
a. $1,200 favorable.
c. $2,020 favorable.
b. $1,200 unfavorable.
d. $2,020 unfavorable.
AICPA adapted
45. Palo Corp. manufactures one product with a standard direct labor cost of 2 hours at $6.00 per hour. During March,
500 units were produced using 1,050 hours at $6.10 per hour. The unfavorable direct labor efficiency variance is:
A. $100.
C. $300.
B. $105.
D. $305.
G & N 10e
83
. Bell Co. manufactures a single product with a standard direct labor cost of 2 hours at $10.00 per hour. During
November, 1,500 units were produced requiring 3,200 hours at $10.25 per hour. What was the unfavorable direct
labor efficiency variance? (E)
A. $2,050
C. $1,250
B. $2,000
D. $1,200
Gleim
84
. The direct labor standards for producing a unit of a product are two hours at $10 per hour. Budgeted production
was 1,000 units. Actual production was 900 units, and direct labor cost was $19,000 for 2,000 direct labor hours.
The direct labor efficiency variance was: (E)
A. $1,000 favorable
C. $2,000 favorable
B. $1,000 unfavorable
D. $2,000 unfavorable
CIA adapted
43. DIGITAL Products produces a product, Digit, and uses standard costing methods. The standard direct labor cost of
Digit is one and one-half hours at P180 per hour. During October, 19x7, 500 Digit units were produced in 1,000
hours at P176 per hour. The direct labor efficiency variance is a favorable (an unfavorable) (E)
a. P30,000
c. P(30,000)
b. P45,000
d. P(45,000)
RPCPA 1097
*.
Alice & Co. has this selected information: standard direct labor hours of 2,000 at P7.00/hour and actual labor hours
worked are 2,400 at an actual rate of P7.60/hour. The labor efficiency variance is (E)
a. P1,400
c. P2,800
b. P2,400
d. none of these
RPCPA 1087
43. Genco paid $39,400 to direct labor for the production of 1,500 units. Standards allow 2 labor hours per unit at a rate
of $12.50 per hour. Actual hours totaled 2,900. The direct labor efficiency variance was (E)
a. $1,250 favorable.
c. $3,150 unfavorable.
b. $3,150 favorable.
d. $1,900 unfavorable.
D, L & H 9e
43. Genco paid $78,800 to direct labor for the production of 1,500 units. Standards allow 2 labor hours per unit at a rate
of $25.00 per hour. Actual hours totaled 2,900. The direct labor efficiency variance was (E)
a. $2,500 favorable
c. $6,300 unfavorable
b. $3,800 favorable
d. some other number
L & H 10e
47. Chippewa paid $32,225 to direct labor for the production of 1,700 units. Standards allow 3 labor hours per unit at a
rate of $6.50 per hour. Actual hours totaled 5,150. The direct labor efficiency variance was (E)
a. $1,250 favorable.
c. $325 favorable.
b. $925 favorable.
d. $325 unfavorable.
D, L & H 9e
85
. The total budgeted direct labor cost of a company for the month was set at $75,000 when 5,000 units were planned
to be produced. The following standard cost, stated in terms of direct labor hours (DLH), was used to develop the
budget for direct labor cost:
1.25 DLH x $12.00/DLH = $15.00/unit produced
The actual operating results for the month were as follows:
Actual units produced
5,200
Actual direct labor hours worked
6,600
Actual direct labor cost
$77,220
The direct labor efficiency variance for the month would be (E)
A. $4,200 unfavorable.
C. $2,220 unfavorable.
B. $3,000 unfavorable.
D. $1,200 unfavorable.
CIA 1191 IV-15
50. Cameron Company has standard variable costs as follows:
Materials, 3 pounds at $4.00 per pound
Labor, 2 hours at $10.00 per hour
Variable overhead, $7.50 per labor hour
$12.00
20.00
15.00
$47.00
During September, Chetek produced 5,000 units, using 9,640 labor hours at a total wage of $94,670 and incurring
$78,600 in variable overhead. The direct labor efficiency variance is (E)
a. $1,730 favorable.
c. $3,600 favorable.
b. $2,700 favorable.
d. $5.330 favorable.
D, L & H 9e
.
Blasto Company produces bug-bombs. Direct labor standards for the firm and actual data for the month of April are
shown below:
Standard labor rate per hour
$6
Standard hours allowed per bug-bomb
0.05
Actual bug-bombs produced in April
50,000
Actual labor costs for April
$17,400
Actual labor hours recorded for April
3,000
Blasto’s labor efficiency variance for April was (M)
A. $2,900 unfavorable.
C. $3,000 favorable.
B. $2,820 favorable.
D. $3,000 unfavorable. Flamholtz & Diamond
46. The following labor standards have been established for a particular product:
Standard labor hours per unit of output
8.7 hours
Standard labor rate
$18.10 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked
3,800 hours
Actual total labor cost
$67,640
Actual output
500 units
What is the labor efficiency variance for the month?
A. $9,790 F
C. $9,955 F
B. $11,095 U
D. $11,095 F
G & N 10e
86
. 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? (M)
A. Labor efficiency variance.
B. Labor rate variance.
C. Volume variance.
D. Labor spending variance. CIA 0590 IV-15
16. A product requires 0.60 standard labor hours, the actual labor rate is $10 per hour, and production was 300 units.
Actual labor cost was $1,862 at $9.80. Which of the following is true? (M)
a. The labor rate variance was $98 favorable.
b. The labor rate variance was $62 unfavorable.
c. The labor efficiency variance was $62 unfavorable.
d. The labor efficiency variance was $100 unfavorable.
D, L & H 9e
47. The following labor standards have been established for a particular product:
Standard labor hours per unit of output ..
8.3 hours
Standard labor rate ......................
$12.10 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked ......................
6,100 hours
Actual total labor cost ..................
$71,370
Actual output ............................
900 units
What is the labor efficiency variance for the month? (E)
a. $19,017 F
c. $16,029 F
b. $19,017 U
d. $16,577 F
G & N 9e
Actual Hours Worked
50. The standards for direct labor for a product are 2.5 hours at $8 per hour. Last month, 9,000 units of the product were
made and the labor efficiency variance was $8,000 F. The actual number of hours worked during the past period
was: (M)
a. 23,500.
c. 20,500.
b. 22,500.
d. 21,500.
G & N 9e
66. Rainbow Company uses a standard cost system. Information about its direct labor costs for Product Lux for the
month of January follows:
Standard hours allowed for actual production
1,500
Actual hourly rate paid
P61.00
Standard hourly rate
P60.00
Labor efficiency variance – favorable
P6,000
How many direct labor hours were actually worked during the month of January?
A. 1,400
C. 1,498
B. 1,402
D. 1,600
Pol Bobadilla
48. BINGO Co. uses a standard cost system. Direct labor statistics for the month of May, 19x7 follows:
Actual rate per hour
P152.50
Standard rate per hour
P150.00
Labor efficiency variance – unfavorable
P15,000
Standard hours allowed for actual production
37,500
What was the actual number of hours worked? (M)
a. 35,700
c. 37,000
b. 36,700
d. 37,600
RPCPA 0597
50. Harper Company uses a standard cost system. Data relating to direct labor for the month of August follows:
Direct labor efficiency variance—favorable
$5,250
Standard direct labor rate
$7.00
Actual direct labor rate
$7.50
Standard hours allowed for actual production
9,000
What are the actual hours worked for the month of August?
A. 9,750
C. 8,300
B. 8,400
D. 8,250
G & N 10e
20. Information on Ulan Company’s direct labor costs is as follows:
Standard direct labor rate
Actual direct labor rate
Standard direct labor hours
Direct labor usage variance – unfavorable
What were the actual hours worked, rounded to the nearest hour?
a. 21,914
c. 21,120
B. 20,714
d. 21,200
12. Information on Rita Company’s direct labor costs is as follows:
Standard direct labor rate
Actual direct labor rate
Standard direct labor hours
Direct labor usage variance – unfavorable
What were the actual hours worked, rounded to the nearest hour?
a. 11,914
c. 11,120
b. 10,714
d. 11,200
P7.50
P7.00
20,000
P8,400
Pol Bobadilla
P 3.75
P 3.50
10,000
P 4,200
Pol Bobadilla
87
. Tub Co. uses a standard cost system. The following information pertains to direct labor for product B for the month
of October:
Standard hours allowed for actual production
2,000
Actual rate paid per hour
$8.40
Standard rate per hour
$8.00
Labor efficiency variance
$1,600 U
What were the actual hours worked? (M)
a. 1,800
c. 2,190
b. 1,810
d. 2,200
AICPA 1186 II-21
88
. Bolt Co. uses a standard-cost system. Bolt's direct labor information for July is as follows:
Standard hours allowed for actual production
3,000
Actual rate paid per hour
$9.35
Standard rate per hour
$8.50
Labor efficiency variance
$1,870 U
The actual hours worked equaled (M)
A. 2,780
C. 3,200
B. 2,800
D. 3,220
Gleim
89
. Information on Orman Company's direct labor costs is as follows:
Standard direct labor rate
Actual direct labor rate
Standard direct labor hours
Direct labor usage (efficiency) variance—unfavorable
What were the actual hours worked, rounded to the nearest hour?
A. 11,914
C. 11,120
B. 10,714
D. 11,200
$3.75
$3.50
10,000
$ 4,200
Carter & Usry
49. Lab Corp. uses a standard cost system. Direct labor information for Product CER for the month of October follows:
Standard direct labor rate .................
$6.00 per hour
Actual direct labor rate paid ..............
Standard hours allowed for actual production
Labor efficiency variance--unfavorable .....
What are the actual hours worked? (M)
a. 1,400.
c. 1,598.
b. 1,402.
d. 1,600.
$6.10 per hour
1,500 hours
$600
AICPA adapted
Standard Hours Allowed
48. The Fischer Company uses a standard costing system. For the month of December, the following data have been
assembled:
Actual direct labor hours worked
5,800 hours
Standard direct labor rate
$9 per hour
Labor efficiency variance
$1,800 unfavorable
The standard hours allowed for December production is:
A. 5,400 hours.
C. 5,800 hours.
B. 5,600 hours.
D. 6,000 hours.
G & N 10e
28. 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 (M)
a. P52,500
c. P62,500
b. P60,000
d. P70,000
RPCPA 1094
9. The Taxi Corporation makes a variety of leather goods. It uses standard costs and a flexible budget to aid planning
and control. Budgeted variable overhead at a 45,000 direct labor hour level is P27,000.
During April material purchases were P241,900. Actual direct-labor costs incurred were P140,700. The direct-labor
usage variance was P5,100 unfavorable. The actual average wage rate was P0.20 lower than the average standard
wage rate.
The company uses a variable overhead rate of 20% of standard direct-labor cost for flexible budgeting purposes.
Actual variable overhead for the month was P30,750.
What were the standard hours allowed during the month of April? (D)
A. 50,250
C. 48,550
B. 58,625
D. 37,520
Pol Bobadilla
DL Rate Variance
90
. 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? (M)
A. $44,496 unfavorable.
C. $49,440 favorable.
B. $49,440 unfavorable.
D. $50,400 favorable.
42,000
41,200
$247,200
$3,840
Gleim
54. Borden Enterprises uses standard costing. For the month of April, the company reported the following data:
Standard direct labor rate:
$10 per hour
Standard hours allowed for actual production:
8,000
Actual direct labor rate:
$9.50 per hour
Labor efficiency variance:
$4,800 F
The labor rate variance for April is: (M)
a. $3,760 U.
c. $2,850 F.
b. $3,760 F.
d. $2,850 U.
G & N 9e
66. Rainbow Company uses a standard cost system. Information about its direct labor costs for Product Lux for the
month of January follows:
Standard hours allowed for actual production
1,500
Actual hourly rate paid
P61.00
Standard hourly rate
P60.00
Labor efficiency variance – favorable
P6,000
How much was the direct labor rate variance? (M)
A. 1,400 F
C. 1,400 U
B. 1,600 F
D. 1,600 U
Pol Bobadilla
DL Rate & Efficiency Variance - Given
Actual Hours
37. Acme Company produced 500 units with a $50 unfavorable labor rate variance. The labor use variance was $180
favorable. Actual labor cost was $17,870. The standard wage rate was $9. Actual hours were (M)
a. 1,520
c. 2,000
b. 1,980
d. 2,020
D, L & H 9e
51. In a certain standard costing system the following results occurred last period: labor rate variance, $1,000 U; labor
efficiency variance, $2,800 F; and the actual labor rate was $0.20 more per hour than the standard labor rate. The
number of actual direct labor hours used last period was: (M)
a. 9,000.
c. 5,000.
b. 5,400.
d. 4,800.
G & N 9e
Actual Wage Rate
45. Jeter’s Company had a $510 unfavorable direct labor rate variance and a $1,000 favorable efficiency variance.
Jeter’s standard payroll was $11,200 at a standard wage of $10 per hour. What was the actual direct labor wage
rate? (M)
a. $9.56
c. $10.50
b. $10.00
d. Some other number.
D, L & H 9e
44. SUPERIOR Mfg. Co., using a standard cost system, furnished information on direct labor cost as follows:
Standard direct labor hours
75,000
Actual direct labor hours
72,500
Total payroll
P275,500
Unfavorable rate variance
14,500
Favorable efficiency variance
10,000
What was SUPERIOR’s actual direct labor rate per hour? (E)
a. P3.80
c. P4.20
b. P4.00
d. P4.25
RPCPA 1097
Standard Hours
19. A company made 1,200 units with a $550 favorable labor use variance. There was no labor rate variance and
actual labor cost was $19,250. The actual wage rate was $11. Standard labor time per unit is (M)
a. 0.5 hours.
c. 1.5 hours.
b. 1.0 hour
d. 2.0 hours.
D, L & H 9e
Standard Direct Labor Rate
44. Danner had a $550 favorable direct labor rate variance and a $720 unfavorable efficiency variance. Danner paid
$6,650 for 800 hours of labor. What was the standard direct labor wage rate? (M)
a. $8.10
c. $9.00
b. $8.31
d. Some other number.
D, L & H 9e
53. For the month of April, Thorp Co.'s records disclosed the following data relating to direct labor:
Actual cost ...............
$10,000
Rate variance .............
$ 1,000 favorable
Efficiency variance .......
$ 1,500 unfavorable
For the month of April, actual direct labor hours amounted to 2,000. In April, Thorp's standard direct labor rate per
hour was: (M)
a. $5.50.
c. $4.75.
b. $5.00.
d. $4.50.
AICPA adapted
51. X’OR Co. uses a standard cost system, and data for its direct labor costs are summarized below:
Actual direct labor hours
72,500
Standard direct labor hours
75,000
Total direct labor payroll
P275,500
Direct labor rate variance – favorable
14,500
Direct labor efficiency variance - favorable
10,000
The standard direct labor rate per hour is (M)
a. P3.60
c. P4.00
b. P3.80
d. P4.20
RPCPA 1096
Rate Variance & Budget Variance
Actual Direct Labor Rate
31. TAMARAW, Inc. has a maintenance shop where repairs to its motor vehicles are done. During last month’s labor
strike, certain records 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 (M)
a. P27.20 per hour
c. P30.25 per hour
b. P28.80 per hour
d. P31.40 per hour
RPCPA 0595 II-3
DL Rate & Efficiency Variance
Questions 50 and 51 are based on the following information.
CIA 1189 IV-17 & 18
One of the items produced by a manufacturer of lawn and garden tools is a chain saw. The direct labor standard for
assembling and testing a chain saw is 2.5 hours at $8 per hour. Budgeted production for October was 1,200 units. Actual
production during the month was 1,000 units, and direct labor cost was $27,840 for 3,200 hours.
91
. Using a two-variance system, what was the direct labor price (rate) variance for October? (E)
A. $2,240 favorable.
C. $3,840 favorable.
B. $2,240 unfavorable.
D. $5,600 unfavorable.
92
. Using a two-variance system, what is the direct labor efficiency variance? (E)
A. $2,240 unfavorable.
C. $5,600 unfavorable.
B. $5,600 favorable.
D. $6,090 favorable.
Questions 106 and 107 are based on the following information.
The standard direct labor cost to produce one pound of output for a company is presented below. Related data regarding
the planned and actual production activities for the current month for the company are also given below:
CIA 0597
III-89 & 90, 0R98 IV-67 & 68
NOTE: DLH = Direct labor hours
Direct labor standard: 0.4 DLH @ $12.00 per DLH =
$4.80
Planned production
15,000 pounds
Actual production
15,500 pounds
Actual direct labor costs (6,250 DLH)
$75,250
93
. The company's direct labor rate variance for the current month is
A. $10 unfavorable.
C. $248 unfavorable.
B. $240 unfavorable.
D. $250 unfavorable.
94
. The company's direct labor efficiency variance for the current month is
A. $600 unfavorable.
B. $602 unfavorable.
C. $2,400 unfavorable.
D. $3,000 unfavorable.
Questions 91 & 92 are based on the following information.
G & N 9e
The following labor standards have been established for a particular product:
Standard labor hours per unit of output ..
7.5 hours
Standard labor rate ......................
$15.25 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked ......................
9,600 hours
Actual total labor cost ..................
$144,480
Actual output ............................
1,200 units
91. What is the labor rate variance for the month? (E)
a. $1,920 F
c. $1,920 U
b. $240 U
d. $240 F
92. What is the labor efficiency variance for the month? (E)
a. $7,230 U
c. $7,230 F
b. $9,030 U
d. $9,150 U
Questions 83-84 are based on the following information:
G & N 10e
The following labor standards have been established for a particular product:
Standard labor hours per unit of output
8.1 hours
Standard labor rate
$14.40 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked
8,700 hours
Actual total labor cost
$129,195
Actual output
1,000 units
83. What is the labor rate variance for the month?
A. $450 F
C. $3,915 U
B. $3,915 F
D. $450 U
84. What is the labor efficiency variance for the month?
A. $8,910 U
C. $12,555 U
B. $12,555 F
D. $8,640 U
Questions 85-86 are based on the following information:
G & N 10e
The following labor standards have been established for a particular product:
Standard labor hours per unit of output
9.8 hours
Standard labor rate
$16.40 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked
7,900 hours
Actual total labor cost
$127,980
Actual output
700 units
85. What is the labor rate variance for the month?
A. $140 U
C. $140 F
B. $1,580 U
D. $1,580 F
86. What is the labor efficiency variance for the month?
A. $17,056 U
C. $15,476 F
B. $15,476 U
D. $16,848 U
Total DL Variance & Actual DLH
Questions 1 & 2 are based on the following information.
H&M
Smith Company uses a standard cost system. The following information pertains to direct labor costs for the month of
June.
Standard direct labor rate per hour
$10.00
Actual direct labor rate per hour
$9.00
Labor rate variance
$12,000 favorable
Actual output
2,000 units
Standard hours allowed for actual production
10,000 hours
95
. What is the total labor budget variance for Smith Company?
a. $12,000(F)
d. $8,000(U)
b. $8,000(F)
e. $20,000(U)
c. $12,000(U)
96
. How many actual labor hours were worked during March for Smith Company?
a. 10,000
d. 12,000
b. 2,000
e. 1,000
c. 1,200
DL Mix and Yield Variance
Questions 54 and 55 are based on the following information.
Gleim
Landeau Manufacturing Company has a process cost accounting system. A monthly analysis compares actual results
with both a monthly plan and a flexible budget. Standard direct labor rates used in the flexible budget are established at
the time the annual plan is formulated and held constant for the entire year. Standard direct labor rates in effect for the
fiscal year ending June 30 and standard hours allowed for the output in April are
Standard DL Rate per Hour
Standard DLH Allowed for Output
Labor class III
$8.00
500
Labor class II
7.00
500
Labor class I
5.00
500
The wage rates for each labor class increased on January 1 under the terms of a new union contract negotiated in
December of the previous fiscal year. The standard wage rates were not revised to reflect the new contract. The actual
direct labor hours (DLH) worked and the actual direct labor rates per hour experienced for the month of April were as
follows:
Actual Direct Labor
Actual Rate per Hour
Direct Labor Hours
Labor class III
$8.50
550
Labor class II
7.50
650
Labor class I
5.40
375
97
. What is the labor yield variance for Landeau in April (rounded)? (M)
A. $500 unfavorable.
C. $825 favorable.
B. $750 unfavorable.
D. $1,500 favorable.
98
. What is the labor mix variance for Landeau in April? (M)
A. $325.00 unfavorable.
C. $180.00 favorable.
B. $66.67 unfavorable.
D. $50.00 favorable.
Questions 56 through 58 are based on the following information.
Gleim
The information was presented as part of Question 4 on Part 4 of June 1978 CMA exam. A company’s standard direct
labor rates in effect for the fiscal year ending June 30 and standard hours allowed for the output in April are
Standard DL
Standard DLH
Rate per Hour
Allowed for Output
Labor class III
$8.00
500
Labor class II
7.00
500
Labor class I
5.00
500
The wage rates for each labor class increased on January 1, under the terms of a new union contract. The standard
wage rates were not revised.
The actual direct labor hours (DLH) and the actual direct labor rates for April were as follows:
Actual Rate
Actual DLH
Labor class III
$8.50
550
Labor class II
7.50
650
Labor class I
5.40
375
99
. What is the labor yield variance (rounded)? (M)
a. $500
c. $820
b. $320
d. $515
100
. What is the labor mix variance (rounded)? (M)
a. $50.00
c. $66.67
b. $320.00
d. $500.00
101
. The labor mix and labor yield variances together equal the (E)
a. Total labor variance.
b. Labor rate variance.
c. Labor efficiency variance.
d. Sum of the labor efficiency and overhead efficiency variances.
Questions 1 thru 3 are based on the following information.
H&M
Harrigan Corporation 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
Standard Unit Price
Standard Cost
Mixing
500 hours
$10.00 per unit
$5,000
Finishing
250 hours
5.00 per unit
$1,250
Yield
4,000 units
During January, the following actual production information was provided:
Labor Type
Actual Mix
Mixing
4,500 units
Finishing
3,000 units
Yield
36,000 units
. What is the labor mix variance?
a. $2,500 (F)
b. $5,000 (U)
c. $5,000 (F)
d. $2,500 (U)
. What is the labor yield variance?
a. $6,250 (F)
b. $4,000 (F)
c. $6,250 (U)
d. $4,000 (U)
. What is the labor efficiency variance?
a. $2,500 (F)
b. $6,250 (U)
c. $3,750 (F)
d. $3,750 (U)
102
103
104
Questions 59 through 61 are based on the following information.
Gleim
Mountain View Hospital (MVH) has adopted a standard cost accounting system for evaluation and control of nursing
labor. Diagnosis Related Groups (DRGs), instituted by the U.S. government for health insurance reimbursement, are
used as the output measure in the standard cost system. A DRG is a patient classification scheme in which hospitals are
regarded as multiproduct firms with inpatient treatment procedures related to the numbers and types of patient ailments
treated. MVH has developed standard nursing times for the treatment of each DRG classification, and nursing labor
hours are assumed to vary with the number of DRGs treated within a time period.
The nursing unit on the fourth floor treats patients with four DRG classifications. The unit is staffed with registered nurses
(RNs), licensed practical nurses (LPNs), and aides. The standard nursing hours and salary rates and actual numbers of
patients for the month of May were as follows.
DRG
Actual
Standard Total Standard Hours
Classific
No.
Hour
ation
of
s
Patients
per
DR
G
RN
LPN
Aide
RN
LPN
Aide
1
250
6
4
5
1,500
1,000
1,250
2
90
26
16
10
2,340
1,440
900
3
240
10
5
4
2,400
1,200
960
4
140
12
7
10
1,680
980
1,400
7,920
4,620
4,510
Standard Hourly Rates
RN
LPN
Aide
$12.00
8.00
6.00
The results of operations during May for the fourth floor nursing unit are presented below:
RN
LPN
Aide
Actual hours
8,150
4,300
4,400
Actual salary
$100,245
$35,260
$25,300
Actual hourly rate
$12.30
$8.20
$5.75
Because MVH does not have data to calculate variances by DRG, it uses a flexible budgeting approach to calculate
labor variances for each reporting period by labor classification (RN, LPN, Aide). Labor mix and labor yield variances are
also calculated because one labor input can be substituted for another. The variances are used by nursing supervisors
and hospital administration to evaluate the performance of nurses.
105
. What is the total flexible budget variance? (M)
A. $2,205 favorable.
B. $2,205 unfavorable.
106
. What is the labor mix variance? (M)
A. $2,205 unfavorable.
B. $2,205 favorable.
107
. What is the labor yield variance? (M)
A. $1,908 favorable.
B. $1,866 favorable.
C. $1,745 favorable.
D. $1,745 unfavorable.
C. $1,406 unfavorable.
D. $1,406 favorable.
C. $1,733 favorable.
D. $460 favorable.
Bonus Computation
25. 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 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 (M)
a. Alan = P36 bonus.
b. Joel = P54 bonus.
c. Romy = P126 bonus.
d. Tony = P252 bonus.
RPCPA 0594
Questions 62 and 63 are based on the following information.
RPCPA 0584
Ipil-ipil Woods Inc. grants bonus to its plant employees equal to 50% pay for the time saved in production. The company
has set up a standard rate of production of 200 units of cutting board per hour. The standard pay per labor hour is P8.
Factory overhead varies at the rate of P2.50 per hour.
During the month of June, the employees worked a total of 25,000 direct labor hours and produced 6,000,000 units of
cutting boards. The total variable factory overhead amounted to P62,500. Bonus checks are issued to employees in the
month following the month in which the standards are exceeded.
*. The labor bonus for the production in June is (M)
a. P6,250
c. P20,000
b. P12,500
d. P38,000
*.
The total net savings to the company for the month of June after deducting the bonus is (M)
a. P25,000
c. P52,500
b. P32,500
d. P60,000
OVERHEAD VARIANCE
Setting Predetermined Rates
Plant Capacity
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 121 AND 122.
Horngren
A manufacturing firm is able to produce 1,000 pairs of shoes per hour, at maximum efficiency. There are three eighthour shifts each day. Due to unavoidable operating interruptions, production averages 800 units per hour. The plant
actually operates only 27 days per month.
108
. What is the theoretical capacity for the month of April? (E)
a. 1,000,000 units
c. 518,400 units
b. 720,000 units
d. 240,000 units
109
. What is the practical capacity for the month of April? (E)
a. 1,000,000 units
c. 518,400 units
b. 720,000 units
d. 240,000 units
Budgeted Overhead
17. Machine hours used to set the predetermined overhead rate were 50,000, actual hours were 48,000, and overhead
applied was $120,000. Budgeted overhead for the year was
a. $115,200
c. $120,000
b. $118,000
d. $125,000
D, L & H 9e
42. Machine hours used to set the predetermined overhead rate were 80,000, actual hours were 90,000, and overhead
applied was $117,000. Budgeted overhead for the year was
a. $104,000
c. $131,625
b. $117,000
d. Some other number.
D, L & H 9e
Budgeted Fixed Factory Overhead
34. The predetermined overhead rate (variable and fixed) is $7.50 per machine hour and the denominator activity level
is 135,000 machine hours. If the variable portion of the predetermined overhead rate is $3.00 per machine hours,
then the budgeted fixed factory overhead for the year is: (M)
a. $30,000.
c. $405,000.
b. $607,500.
d. $1,012,500.
G & N 9e
.
ABC Company applies overhead at P8 per direct labor hour of which P3 was variable overhead. Budgeted directed
labor hours were 80,000. Budgeted fixed overhead was (E)
A. P200,000
C. P400,000
B. P640,000
D. P240,000
RPCPA 1001
Denominator Hours
77. Nevada Company uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it
incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied
$363,000 of overhead during the year. How many direct labor hours did the company plan to incur?
a. 1,150,000
c. 1,200,000
b. 1,190,000
d. 1,210,000
Barfields
. In connection with a standard cost system being developed by Flint Co., the following information is being
considered with regard to standard hours allowed for output of one unit of product:
Hours
Average historical performance for the past 3 years
1.85
Production level to satisfy average consumer demand over a seasonal
time span
1.60
Engineering estimates based on attainable performance
1.50
Engineering estimates based on ideal performance
1.25
110
To measure controllable production inefficiencies, what is the best basis for Flint to use in establishing standard
hours allowed? (E)
a. 1.25
c. 1.60
b. 1.50
d. 1.85
AICPA 1192
Standard Variable Overhead Rate
9. Filter Company’s budget for overhead cost is: total overhead cost = $50,000 + ($4 x direct labor hours). Standard
direct labor time is 1.5 hours per unit of product. The standard wage rate is $6 per hour. Standard variable
overhead cost for a unit of product is
a. $4.00
c. $9.00
b. $6.00
d. $10.00
D, L & H 9e
18. 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 (E)
a. P2.57
c. P2.93
b. P2.63
d. P3.02
RPCPA 1097
Standard Overhead Rate
2. If annual overhead costs are expected to be P1,000,000 and 200,000 total labor hours are anticipated (80% direct,
20% indirect), the overhead rate based on direct labor hours is
A. P6.25
C. P25.00
B. P5.00
D. P4.00
Pol Bobadilla
32. At the end of the year, actual manufacturing overhead costs were $110,000 and applied manufacturing overhead
costs were $118,800. If the denominator activity for the year was 20,000 machine-hours, and if 22,000 standard
machine-hours were allowed for the year's production, the predetermined overhead rate per machine-hour was:
A. $5.00.
C. $5.50.
B. $5.94.
D. $5.40.
G & N 10e
34. Dean Company uses a standard cost system in which it applies manufacturing overhead to units of product on the
basis of direct labor-hours. The company is preparing a flexible budget for next year and the following data are
available:
At capacity
Direct labor-hours
60,000
Variable factory overhead
$150,000
Fixed factory overhead
$240,000
Assume that Dean's denominator activity for the year is set at 80% of capacity. What would be the total
predetermined overhead rate, based on direct labor-hours, for the year?
A. $6.00.
C. $7.50.
B. $6.50.
D. $8.13.
G & N 10e
25. ABC Company is preparing a flexible budget for 2004 and the following maximum capacity estimates for the
manufacturing division are available:
Direct labor hours
60,000 hours
Variable factory overhead
P600,000
Fixed manufacturing overhead
P300,000
Assume that ABC’s expected capacity is 80% of maximum capacity. What would be the total factory overhead rate,
based on direct labor hours, in a flexible budget at expected capacity?
a. P18.75
C. P16.25
b. P14.25
D. P15.00
Pol Bobadilla
5. Sales Company is preparing a flexible budget for 2004 and the following maximum capacity estimates for Assembly
Department are available:
Direct labor hours
80,000 hours
Variable factory overhead
P640,000
Fixed manufacturing overhead
P300,000
Assume that Sales’ expected capacity is 75% of maximum capacity. What would be the total factory overhead rate,
based on direct labor hours, in a flexible budget at expected capacity?
A. P13.00
C. P11.75
B. P15.67
D. P11.00
Pol Bobadilla
35. At the end of the year, a company's Manufacturing Overhead account contained the following data:
Manufacturing Overhead
Actual
$82,140
$78,260
Applied
$3,880
If the denominator activity for the year was 40,000 machine-hours, and if 36,400 machine-hours were allowed for
the year's production, then the predetermined overhead rate per machine-hour was:
A. $2.15.
C. $2.26.
B. $1.96.
D. $2.05.
G & N 10e
Denominator Hours & Standard Variable Overhead Rate
4. The MPG Reyes Co. owns 6 machines, each of which is run on a 48-hour week basis. Annually, 100 working hours
are allotted for each machine for periodic cleansing and greasing.
During the year, the company was closed for 250 hours due to a strike triggered by labor-management disputes.
With the intervention of the Labor Ministry, the company was able to resume operations. However, it suffered
unexpected delays in obtaining the needed raw materials, thus resulting in additional loss of machine hours of 950 .
Manufacturing expenses which vary with productive hours totaled P38,600 for the 6 machines.
Assuming that the company normally closes for 3 weeks annually due to slack season, what is the normal number
of machine hours worked and how much is the variable expense per working hours? (D)
RPCPA 1086
a.
b.
c.
d.
Normal Number of Machine Hours
13,176
12,312
14,376
13,512
Variable Expense per Working Hour
P2.92
P3.14
P2.92
P3.14
ONE-WAY VARIANCE
Flexible Budget Based on Actual Output
79. Ashley Co. has developed the following flexible budget formula for monthly overhead:
For output of less than 200,000 units:
$36,600 + $.80(units)
For output of 200,000 units or more:
$43,000 + $.80(units)
How much overhead should Ashley expect if the firm plans to produce 200,000 units?
a. $52,600
c. $196,600
b. $59,000
d. $203,000
Barfields
111
. Scott Company uses the following flexible budget formula for annual maintenance costs:
Total cost = $6,000 + $0.70 per machine hour
The current month's budget is based on planned machine time of 30,000 hours. Monthly maintenance cost included
in this flexible budget is (M)
A. $20,500
C. $21,500
B. $21,000
D. $27,000
Gleim
112
. A company has the following budget formula for annual electricity expense in its shop:
Expense = $7,200 + ($0.60 x units produced)
If management expects to produce 20,000 units during February, the appropriate monthly flexible budget allowance
for the purpose of performance evaluation should be (M)
a. $7,200
c. $12,600
b. $12,000
d. $19,200
Gleim
22. Molds Corporation has developed the following flexible budget formula for annual indirect labor costs:
Total Cost = P300,000 + P5.00 per machine hour
Operating budgets for the current month are based upon 18,000 machine hours of planned machine time. Indirect
labor costs included in this planning budget are: (M)
a. P300,000
c. P 90,000
b. P390,000
d. P115,000
Pol Bobadilla
5. Saldua Co. uses a monthly cost formula for overhead of P50,000 + P30 for each direct labor hour worked. For the
coming year, Saldua plans to manufacture 200,000 units. Each unit requires five minutes of direct labor. Saldua’s
total budgeted overhead for the coming year is
A. P550,000
C. P1,200,000
B. P1,100,000
D. P650,000
Pol Bobadilla
113
. A company prepares a flexible budget each month for manufacturing costs. Formulas have been developed for all
costs within a relevant range of 5,000 to 15,000 units per month. The budget for electricity (a semivariable cost) is
$19,800 at 9,000 units per month, and $21,000 at 10,000 units per month. How much should be budgeted for
electricity for the coming month if 12,000 units are to be produced? (E)
A. $26,400
C. $23,400
B. $25,200
D. $22,200
CIA 0586 IV-12
*. Assuming the flexible budget of Dept. 1 is as follows:
Hours of activity
1,500
2,000
Fixed costs
P7,500
P7,500
Variable costs
5,250
7,000
Total costs
P12,750
P14,500
The budgeted total cost for this department at the 1,700 hour level of activity is (E)
a. P13,450
b. P13,625
c. P19,757
d. P27,250
RPCPA 1077
2. WORD PROCESSORS, Inc. provides computer processing services, and relevant data set up by the firm’s
management are shown below:
No. of pages per hour
20
No. of hours per month
500
Variable costs per hour
P30
Fixed costs per month
P10,000
For the month of May, 19x4, 12,000 pages are generated in 450 hours. The actual variable costs totaled P13,200,
while the actual fixed costs equaled the estimated amount. The total standard cost for May was
a. P25,000
c. P30,000
b. P27,500
d. P31,500
RPCPA 0594
. Based on past experience, a company has developed the following budget formula for estimating its shipping
expenses. The company’s shipments average 12 lbs. per shipment:
Shipping costs = $16,000 + ($0.50 x lbs. shipped)
The planned activity and actual activity regarding orders and shipments for the current month are given in the
following schedule:
Plan
Actual
Sales orders
800
780
Shipments
800
820
Units shipped
8,000
9,000
Sales
$120,000
$144,000
Total pounds shipped
9,600
12,300
114
The actual shipping costs for the month amounted to $21,000. The appropriate monthly flexible budget allowance
for shipping costs for the purpose of performance evaluation would be (M)
a. $20,680.
c. $20,800.
b. $20,920.
d. $22,150.
CMA 1295 3-24
*.
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 (M)
a. P10,250
c. P10,340
b. P11,075
d. P10,400
RPCPA 0596
115
. A company has developed the budget formula below for estimating its shipping expenses. Shipments have
historically averaged 12 pounds per shipment.
Shipping costs = $18,000 + ($0.60 x Pounds shipped)
The planned activity and actual activity regarding orders and shipments for the current month are given in the
following schedule:
Plan
Actual
Sales orders
800
780
Shipments
800
820
Units shipped
8,000
9,000
Sales
Total pounds shipped
$120,000
9,600
$144,000
12,500
The actual shipping costs for the month amounted to $21,000. The appropriate monthly flexible budget allowance
for shipping costs for the purpose of performance evaluation should be (M)
a. $18,000
c. $23,760
b. $18,492
d. $25,500
Gleim
Actual Output
116
. At the beginning of the year, Smith Inc. budgeted the following:
Units
Sales
Minus:
Total variable expenses
Total fixed expenses
Net income
Factory overhead:
Variable
Fixed
10,000
$100,000
60,000
20,000
$ 20,000
$ 30,000
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? (D)
A. 10,250.
C. 9,875.
B. 10,000.
D. 9,500.
Gleim
Applied Overhead
Total Overhead Applied
48. Machine hours used to set the predetermined overhead rate were 68,000, actual hours were 64,000, and budgeted
overhead was $142,800. Overhead applied for the year was
a. $134,400
c. $142,800
b. $136,500
d. $151,725
D, L & H 9e
86. One unit requires 2 direct labor hours to produce. Standard variable overhead per unit is $1.25 and standard fixed
overhead per unit is $1.75. If 330 units were produced this month, what total amount of overhead is applied to the
units produced?
a. $990
b. $1,980
c. $660
d. cannot be determined without knowing the actual hours worked
Barfield
31. The Rowe Company uses a standard cost system in which it applies manufacturing overhead to units of product on
the basis of machine-hours. During January, the company budgeted to incur $225,000 in manufacturing overhead
cost and to operate at a denominator activity level of 25,000 machine-hours. At standard, each unit of finished
product requires 3 machine-hours. The following cost and activity were recorded during January:
Total actual manufacturing overhead cost incurred
$217,750
Units of product completed
8,000
Actual machine-hours worked
23,000
The amount of overhead cost that the company applied to Work in Process for January was:
A. $217,750.
C. $221,600.
B. $225,000.
D. $216,000.
G & N 10e
30. The Ammon Company uses a standard cost system in which manufacturing overhead is applied to units on the
basis of machine-hours. During July, the company budgeted $350,000 in manufacturing overhead cost at a
denominator activity of 25,000 machine-hours. At standard, each unit of finished product requires 5 machine-hours.
The follow cost and activity were recorded during July:
Total actual manufacturing overhead cost incurred
$325,000
Units of product completed
4,500
Actual machine-hours worked
23,000
The amount of overhead cost that the company applied to work in process for July was:
A. $292,500.
C. $322,000.
B. $315,000.
D. $325,000.
G & N 10e
33. The Adlake Company makes and sells a single product and uses a standard cost system. During October, the
company budgeted $300,000 in manufacturing overhead cost at a denominator activity of 20,000 machine-hours. At
standard, each unit of finished product requires 5 machine-hours. The following cost and activity were recorded
during October:
Total actual manufacturing overhead cost incurred
$294,000
Units of product completed
3,800
Actual machine-hours worked
19,422
The amount of overhead cost that the company applied to work in process for October was: (M)
a. $279,300.
c. $294,000.
b. $291,330.
d. $285,000.
G & N 9e
117
. Union Company uses a standard cost accounting system. The following factory O/H and production data are
available for August?
Standard fixed O/H rate per DLH
$1
Standard variable O/H rate per DLH
$4
Budgeted monthly DLH
40,000
Actual DLH worked
39,500
Standard DLH allowed for actual production
39,000
Overall O/H variance – favorable
$2,000
The applied factory O/H for August should be (E)
a. $195,000
c. $197,500
b. $197,000
d. $199,500
118
AICPA 1181 I-24
. River Company uses a standard-cost accounting system. It applies overhead based on direct labor hours. The
following overhead costs and production data are available for March:
Standard fixed overhead rate per DLH
$1.50
Standard variable overhead rate per DLH
$5.00
Budgeted monthly DLH
30,000
Actual DLH worked
28,000
Standard DLH allowed for actual production
27,500
Overall overhead variance -- favorable
$2,500
What is the applied factory overhead for March? (M)
A. $137,500
B. $176,250
C. $178,750
D. $182,000
Gleim
27. Overhead cost is applied to units based on direct labor hours. For April, total overhead cost was budgeted at
$80,000 based on a denominator activity level of 20,000 direct labor hours for the month. The standard cost card
indicates that each unit of finished product requires 2 direct labor-hours. The following data are available for April's
activity:
Number of units produced
9,500
Direct labor hours worked
19,500
Actual total overhead cost incurred
$79,500
What amount of total overhead cost would have been applied to production for the month of April? (E)
a. $76,000.
c. $79,500.
b. $78,000.
d. $80,000.
AICPA, Adapted
33. The Judd Company uses a standard cost system in which it applies manufacturing overhead to units of product on
the basis of machine-hours. During May, the company budgeted $320,000 in manufacturing overhead cost at a
denominator activity of 20,000 machine-hours. At standard, each unit of finished product requires 4 machine-hours.
The following cost and activity was recorded during May:
Total actual manufacturing overhead cost incurred
$335,500
Units of product completed
4,700
Actual machine-hours worked
21,000
The amount of overhead cost that the company applied to Work in Process for May was:
A. $336,000.
C. $300,800.
B. $335,500.
D. $315,370.
G & N 10e
Applied Fixed Overhead
85. Actual fixed overhead is $33,300 (12,000 machine hours) and fixed overhead was estimated at $34,000 when the
predetermined rate of $3.00 per machine hour was set. If 11,500 standard hours were allowed for actual production,
applied fixed overhead is
a. $33,300.
b. $34,000.
c. $34,500.
d. not determinable without knowing the actual number of units produced.
Barfield
Over- (Under-) Applied Overhead
Over-applied Overhead
24. Palo applies overhead based on direct labor cost. It had budgeted manufacturing overhead of $500,000 and
budgeted direct labor of $250,000. Actual overhead was $525,000, actual labor cost was $270,000. Overhead was
a. Over-applied by $15,000.
c. Over-applied by $25,000.
b. Over-applied by $20,000.
d. Under-applied by $20,000.
D, L & H 9e
7. ABC Company has prepared the following flexible budget for production costs: total production costs = $340,000 +
$9x, where x is the number of units produced. ABC produced 20,000 units at a total cost of $490,000. The variance
of actual costs from budgeted costs was
a. $150,000 favorable.
c. $30,000 unfavorable.
b. $30,000 favorable.
d. $90,000 unfavorable.
D, L & H 9e
47. Monroe Company has prepared the following flexible budget for production costs: total production costs = $840,000
+ $16x, where X is the number of units produced. Monroe produced 20,000 units at a total cost of $1,290,000. The
variance of actual costs from budgeted costs was
a. $450,000 favorable.
c. $130,000 unfavorable.
b. $130,000 favorable.
d. $450,000 unfavorable.
D, L & H 9e
43. Cooke Company uses the equation $450,000 + $1.50 per direct labor hour to budget manufacturing overhead.
Cooke has budgeted 150,000 direct labor hours for the year. Actual results were 156,000 direct labor hours and
$697,500 total manufacturing overhead. The total overhead variance for the year is
a. $4,500 favorable.
c. $4,500 unfavorable.
b. $18,000 favorable.
*.
d. $18,000 unfavorable.
D, L & H 9e
The following data are presented:
Production in units
Manufacturing overhead
Sales in units
No beginning inventories
Budgeted
50,000
P750,000
No data
Actual
55,000
P800,000
47,000
The under-applied or over-applied overhead is: (M)
a. P25,000 under-applied.
c. P75,000 over-applied.
b. P25,000 over-applied.
d. P75,000 under-applied.
RPCPA 1097
91. Air Inc. uses a standard cost system. Overhead cost information for October is as follows:
Total actual overhead incurred
$12,600
Fixed overhead budgeted
$3,300
Total standard overhead rate per MH
$4
Variable overhead rate per MH
$3
Standard MHs allowed for actual production
3,500
What is the total overhead variance?
a. $1,200 F
c. $1,400 F
b. $1,200 U
d. $1,400 U
Barfield
119
. Pane Company uses a job costing system and applies overhead to products on the basis of direct labor cost. Job
No. 75, the only job in process on January 1, had the following costs assigned as of that date: direct materials,
$40,000; direct labor, $80,000; and factory overhead, $120,000. The following selected costs were incurred during
the year:
Traceable to jobs:
Direct materials
$178,000
Direct labor
345,000
$523,000
Not traceable to jobs:
Factory materials and supplies
46,000
Indirect labor
235,000
Plant maintenance
73,000
Depreciation on factory equipment
29,000
Other factory costs
76,000
459,000
Pane's profit plan for the year included budgeted direct labor of $320,000 and factory overhead of $448,000.
Assuming no work-in-process on December 31, Pane's overhead for the year was
A. $11,000 overapplied.
C. $11,000 underapplied.
B. $24,000 overapplied.
D. $24,000 underapplied.
CMA Samp Q3-5
Under-applied Overhead
*. Information on Bustos Manufacturing Company’s overhead costs is as follows:
Budgeted overhead based on standard direct-labor hours allowed
Budgeted overhead based on actual direct-labor hours allowed
Standard applied overhead
Actual overhead
What is the total overhead variance (M)
a. P4,000 favorable.
c. P8,000 unfavorable.
b. P6,000 unfavorable.
d. P9,000 favorable.
120
P90,000
P89,000
P86,000
P92,000
RPCPA 1079
. Anderson Company prepared the following information using a flexible budget system.
Percentage of total capacity
Anderson operated at 75% of capacity during the year. However, Anderson applied factory overhead based on 90%
of capacity. If actual factory overhead was equal to the factory overhead budgeted for 75% of capacity, what is the
amount of overhead variance for the year? (M)
A. $28,500 underabsorbed.
C. $24,000 underabsorbed.
B. $28,500 overabsorbed.
D. $24,000 overabsorbed.
Gleim
121
. 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? (M)
a. $6,000 over-absorbed.
c. $12,000 over-absorbed.
b. $6,000 under-absorbed.
d. $12,000 under-absorbed. AICPA 0581 I-25
Actual Overhead
25. Markham applies overhead at $4 per machine hour. During March it worked 10,000 hours and over-applied
overhead by $3,000. Actual overhead was
a. $43,000
c. $37,000
b. $40,000
d. None of the above.
D, L & H 9e
122
. 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
$ 5,000
10,000
20,000
100,000
80,000
Gage’s 2000 actual manufacturing overhead was (M)
a. $40,000
c. $55,000
b. $45,000
d. $120,000
Standard Rate & Applied Overhead
Questions 106-107 are based on the following information:
G & N 10e
A manufacturer of industrial equipment has a standard costing system based on direct labor-hours (DLHs) as the
measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
1,400 DLHs
Overhead costs at the denominator activity level:
Variable overhead cost
$5,670
Fixed overhead cost
$27,860
The following data pertain to operations for the most recent period:
Actual hours
Standard hours allowed for the actual output
Actual total variable overhead cost
Actual total fixed overhead cost
2,000 DLHs
1,710 DLHs
$8,000
$27,210
106.What is the predetermined overhead rate to the nearest cent?
A. $23.95
C. $25.15
B. $16.77
D. $17.61
107.How much overhead was applied to products during the period to the nearest dollar?
A. $33,530
C. $47,900
B. $40,955
D. $35,210
Standard Rate, Applied Overhead & Total Overhead Variance
Questions 116 through 118 are based on the following information.
L.J. McCarthy
Patie Company uses a standard FIFO, process-cost system to account for its only product, Mituea. Patie has found that
direct machine hours (DMH) provide the best estimate of the application of O/H. Four (4) standard direct machine hours
are allowed for each unit.
Using simple linear regression analysis in the form y = a + b(DMH), given that (A) equals fixed costs and (B) equals
variable costs, Patie has developed the following O/H budget for a normal activity level of 100,000 direct machine hours:
ITEM (y)
a
b
Supplies
$ 0.50
Indirect Labor
$ 54,750
6.50
Depreciation -- Plant and Equipment
27,000
Property Taxes and Insurance
32,300
Repairs and Maintenance
14,550
1.25
Utilities
3,400
4.75
Total O/H
$132,000
$13.00
Actual fixed O/H incurred was $133,250, and actual variable O/H was $1,225,000. Patie produced 23,500 equivalent
units during the year using 98,700 direct machine hours.
123
. What is the standard O/H rate?
A. $13.00 per DMH.
B. $1.32 per DMH
C. $14.32 per DMH.
D. $13.76 per DMH.
124
. How much O/H should be applied to production?
A. $1,413,384
C. $1,358,250
B. $1,432,000
D. $1,346,080
125
. What is the total O/H variance?
A. $12,170 unfavorable.
B. $55,134 unfavorable.
C. $55,134 favorable.
D. $73,750 favorable.
Flexible Budget based on Standard Input and Standard Variable Overhead Rate
Questions 80 and 81 are based on the following information.
Standard costs and budgetary control methods should be closely related. This relationship is especially important for
factory overhead. Better control over factory overhead can be achieved if a flexible budget, rather than a fixed budget is
used. The flexible budget for Kupang Corporation is summarized below:
Percent of Normal Operating Capacity
80%
90%
100%*
110%
Variable overhead
P21,000
P23,000
P25,000
P27,000
Fixed overhead
50,000
50,000
50,000
50,000
Total factory overhead
P71,000
P73,000
P75,000
P77,000
* normal capacity
In accordance with the standards established, 100,000 units of product should be manufactured when the company
operates at its normal capacity. The standard labor time per unit of product is 15 minutes. Actual production in 1980
was 90,000 units of product in 44,000 hours.
*.
*.
What is the standard variable factory overhead rate per hour?(E)
a. P1.00
c. P2.00
b. P1.50
d. P2.50
RPCPA 1081
What is the budgeted factory overhead adjusted to standard hours? (E)
a. P67,500
c. P75,000
b. P72,500
d. P90,500
RPCPA 1081
Questions 43 thru 46 are based on the following information.
G & N 9e
Pollitt Potato Packers has a flexible budget for manufacturing overhead that is based on direct labor hours. The following
overhead costs appear on the flexible budget at the 200,000 hour level of activity:
Variable overhead costs (total):
Packing supplies ..........
$120,000
Indirect labor ............
$180,000
Fixed overhead costs (total):
Utilities .................
$100,000
Insurance .................
$ 40,000
Rent ......................
$ 20,000
44. The flexible budget would show total variable overhead cost in dollars per direct labor hour as: (E)
a. $0.60.
c. $1.50.
b. $0.90.
d. $1.80.
43. At an activity level of 180,000 direct labor hours, the flexible budget would show indirect labor cost of: (E)
a. $180,000.
c. $144,000.
b. $108,000.
d. $162,000.
45. At an activity level of 180,000 direct labor hours, the flexible budget would show total budgeted fixed costs to be:
(E)
a. $100,000.
c. $150,000.
b. $144,000.
d. $160,000.
46. At an activity level of 160,000 direct labor hours, the flexible budget would show the budgeted amount for utilities to
be: (E)
a. $80,000.
c. $120,000.
b. $100,000.
d. $160,000.
TWO-WAY VARIANCE
Budget Variance
126
. Samuel Company provided the following data for June production activity. Samuel uses a two-way analysis of
overhead variances.
Actual variable factory overhead incurred
$294,000
Variable factory overhead rate per DLH
$6.00
Standard DLH allowed
49,500
Actual DLH
48,000
The budget (controllable) variance for June, assuming that budgeted fixed overhead costs equal actual fixed costs,
is (M)
A. $3,000 favorable.
C. $9,000 favorable.
B. $6,000 unfavorable.
D. $9,000 unfavorable.
Gleim
127
. 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
Total factory O/H per DLH
$108,000
$6.50
Actual data for January were as follows:
Direct labor hours worked
Total factory O/H
Standard DLH allowed for capacity attained
22,000
$147,000
21,000
Using the two-way analysis of O/H variances, what is the budget (controllable) variance for January? (M)
a. $3,000 favorable.
c. $9,000 favorable.
b. $13,500 unfavorable.
d. $10,500 unfavorable.
CPA 0583 I-39
128
. Wheeler Company uses a standard-cost system. Wheeler prepared the following budget using normal capacity for
the month of May:
Direct labor hours
36,000
Variable factory overhead
$72,000
Fixed factory overhead
$162,000
Actual results were as follows:
Direct labor hours worked
Total factory overhead
Standard DLH allowed for capacity attained
33,000
$220,500
31,500
What is the budget (controllable) variance for May using the two-way analysis of overhead variances? (M)
A. $4,500 favorable.
C. $7,500 unfavorable.
B. $7,500 favorable.
D. $13,500 unfavorable.
Gleim
90. Martin Company uses a two-way analysis of overhead variances. Selected data for the April production activity are
as follows:
Actual variable OH incurred
$196,000
Variable OH rate per MH
$6
Standard MHs allowed
33,000
Actual MHs
32,000
Assuming that budgeted fixed overhead costs are equal to actual fixed costs, the controllable variance for April is
a. $2,000 F.
c. $4,000 F.
b. $4,000 U.
d. $6,000 F.
Barfield
34. GMA Company employs a standard absorption system for product costing. The standard cost of its product is as
follows:
Direct materials
P14.50
Direct labor (2 direct labor hours at P8)
16.00
Manufacturing overhead ( 2 DLH at P11)
22.00
The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Joker planned
to produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is:
Variable
P3,600,000
Fixed
3,000,000
During November, GMA produced 26,000 units. GMA used 53,500 direct labor hours in November at a cost of
P433,350. Actual manufacturing overhead for the month was P250,000 fixed and P325,000 variable.
The manufacturing overhead controllable variance for November is
a. P13,000 unfavorable
c. P3,000 favorable
b. P10,000 favorable
d. P4,000 favorable
Pol Bobadilla
Questions 1 & 2 are based on the following information.
A company's only service department provides the following data:
CIA adapted.
Service Center Monthly Budget Service Hours Available Actual Monthly Expense
Carpenter Shop
$40,000
1,600
$47,800
It serves three producing departments that show the following budgeted and actual cost and servicehours data:
Carpenter Shop
Department No.
Estimated Services Required
Actual Services Used
1
350 hrs.
600 hrs.
2
800 hrs.
750 hrs.
3
450 hrs.
650 hrs.
129
. The sold-hour rate for the carpenter shop is:
A. $29.88
B. $20.00
130
C. $25.00
D. $23.90
. The spending variance for the carpenter shop, assuming that 80% of the budgeted expense is fixed, is:
A. $5,800 unfav.
B. $7,800 unfav.
C. $5,800 fav.
D. $7,800 fav.
Volume Variance
39. Gamma Corporation has total budgeted fixed costs of $150,000. Actual production was 8,000 units; normal capacity
is 7,500 units. What was the volume variance? (E)
a. $10,000 favorable
c. $15,000 unfavorable
b. $15,000 favorable
d. $10,000 unfavorable
D, L & H 9e
42. Monona Corporation has total budgeted fixed costs of $64,000. Actual production was 15,000 units; normal capacity
is 16,000 units. What was the volume variance? (E)
a. $4,000 favorable
c. $4,267 unfavorable
b. $4,267 favorable
d. $4,000 unfavorable
D, L & H 9e
13. ABC had $400,000 budgeted fixed overhead costs and based its standard on normal activity of 40,000 units. Actual
fixed overhead costs were $430,000, actual production was 36,000 units, and sales were 30,000 units. The volume
variance was (E)
a. $30,000.
c. $70,000.
b. $40,000.
d. $77,777.
D, L & H 9e
13. ABC had $200,000 budgeted fixed overhead costs and based its standard on normal activity of 20,000 units. Actual
fixed overhead costs were $215,000, actual production was 18,000 units, and sales were 15,000 units. The volume
variance was (E)
a. $15,000
c. $35,000
b. $20,000
d. $38,888
D, L & H 9e
43. QUEEN Processing Co. has set its normal capacity at 24,000 hours for the current year. Fixed overhead was
budgeted for P18,000 and variable overhead was budgeted for P72,000. If actual hours worked for the current year
were 22,000, the idle capacity variance would be (E)
a. P0
c. P6,000
b. P1,500
d. P7,500
RPCPA 1095
*. 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
120,000
150,000
140,000
P6 per hour
P4 per hour
TYD’s 1996 volume variance was (M)
a. P60,000 which is neither favorable nor under-applied.
b. P60,000 favorable.
c. No volume variance.
d. P60,000 under-applied.
RPCPA 1097
6. The following standards were developed based on a capacity of 180,000 direct labor hours as follows:
Standard costs per unit:
Variable portion
2 hours @ P3
= P6
Fixed portion
2 hours @ P5
= P10
During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The
following data relate to April:
 Actual direct labor cost incurred was P644,000 for 165,000 actual hours worked.
 Actual overhead incurred totaled P1,378,000 (P518,000 variable plus P860,000 fixed).
 All inventories are carried at standard cost.
The volume variances for April were (M)
A. P100,000 U
C. P50,000 F
B. P100,000 F
D. P50,000 U
Pol Bobadilla
*.
The following data were gathered from the Paliwas Company’s overhead costs for the January, 1983 production
activity:
Actual total overhead incurred
P112,500
Budgeted fixed overhead
P 40,500
Standard direct-labor hours allowed for actual production
15,000
Standard fixed overhead rate per direct-labor hour
P2.25
Standard variable overhead rate per direct-labor hour
P3.25
Paliwas Company has been maintaining a standard absorption and flexible budgeting system. It also uses the twovariance method (two-way) for overhead variances. What is Paliwas volume (denominator) variance for January,
1983? (M)
a. P6,750 favorable
c. P8,250 favorable
b. P6,750 unfavorable
d. P8,250 unfavorable
RPCPA 1083
38. 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: (M)
a. $6,000 unfavorable.
c. $12,000 unfavorable.
b. $6,000 favorable.
d. $12,000 favorable.
AICPA, Adapted
28. Hero Company uses a flexible budget system and prepared the following information for the year:
Percent of Capacity
80 Percent
90 Percent
Direct labor hours
24,000
27,000
Variable factory overhead
P 54,000
P 60,750
Fixed factory overhead
P108,000
P 108,000
Total factory overhead rate per DLH
P6.75
P6.25
Hero operated at 80 percent of capacity during the year, but applied factory overhead based on the 90 percent
capacity level. Assuming that actual factory overhead was equal to the budgeted amount of overhead, how much
was the overhead volume variance for the year? (M)
a. P12,000 unfavorable
c. P16,750 unfavorable
b. P12,000 favorable
d. P16,750 favorable
Pol Bobadilla
28. Fidelity Company uses a flexible budget system and prepared the following information for the year:
Percent of Capacity
80 Percent
90 Percent
Direct labor hours
24,000
27,000
Variable factory overhead
P 54,000
P 60,750
Fixed factory overhead
P81,000
P 81,000
Total factory overhead rate per DLH
P5.625
P5.25
Fidelity operated at 80 percent of capacity during the year, but applied factory overhead based on the 90 percent
capacity level. Assuming that actual factory overhead was equal to the budgeted amount of overhead, how much
was the overhead volume variance for the year? (M)
a. P9,000 unfavorable
c. P9,000 favorable
b. P15,750 unfavorable
d. P15,750 favorable
Pol Bobadilla
21. Meteor Company employs a standard absorption system for product costing. The standard cost of its product is as
follows:
Direct materials
P14.50
Direct labor (2 direct labor hours at P9)
18.00
Manufacturing overhead ( 2 DLH at P12)
24.00
The manufacturing overhead rate is based upon the annual normal activity level of 600,000 direct labor hours.
Meteor planned to produce 25,000 units each month during the year. The budgeted annual manufacturing overhead
is:
Variable
P4,200,000
Fixed
3,000,000
During November, Meteor produced 26,000 units. Meteor used 53,500 direct labor hours in November at a cost of
P433,350. Actual manufacturing overhead for the month was P250,000 fixed and P325,000 variable.
The manufacturing overhead volume variance for November is (M)
a. P10,000 unfavorable
c. P5,000 unfavorable
b. P10,000 favorable
d. P5,000 favorable
Pol Bobadilla
26. Lord Industries manufactures a single product. Variable production costs are P10 and fixed production costs are
P75,000. Lord uses a normal activity of 10,000 units to set its standard costs. Lord began the year with no
inventory, produced 11,000 units and sold 10,500 units. The volume variance under each product costing are: (M)
Pol Bobadilla
A.
B.
C.
D.
Absorption Costing
P3,750
P3,750
P7,500
P7,500
Variable
P
0
P7,500
P3,750
P
0
13. Atlas Company employs a standard absorption system for product costing. The standard cost of its product is as
follows:
Direct materials
P14.50
Direct labor (2 direct labor hours at P8)
16.00
Manufacturing overhead ( 2 DLH at P11)
22.00
The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Atlas planned
to produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is:
Variable
P3,600,000
Fixed
3,000,000
During November, Atlas produced 26,000 units. Atlas used 53,500 direct labor hours in November at a cost of
P433,350. Actual manufacturing overhead for the month was P250,000 fixed and P325,000 variable.
The manufacturing overhead volume variance for November is
a. P12,000 favorable
c. P3,000 favorable
b. P10,000 favorable
d. P9,000 favorable
Pol Bobadilla
Budgeted Capacity
*. 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? (M)
a. 18,750
b. 20,313
*.
c. 17,590
d. 16,500
RPCPA 1001
Eastern Co. has total budgeted fixed costs of $150,000. Actual production of 39,000 units resulted in a $6,000
favorable volume variance. What normal capacity was used to determine the fixed overhead rate? (M)
a. 33,000
c. 40,560
b. 37,500
d. 40,625
D, L & H 9e
49. Western Co. has total budgeted fixed costs of $72,000. Actual production of 5,500 units resulted in a $6,000
unfavorable volume variance. What normal capacity was used to determine the fixed overhead rate? (M)
a. 5,000
c. 6,000
b. 5,500
d. 5,077
D, L & H 9e
Budgeted Fixed Overhead Costs
41. Western Company has a standard fixed cost of $8 per unit. At an actual production of 8,000 units a favorable
volume variance of $12,000 resulted. What were total budgeted fixed costs? (E)
a. $52,000
c. $76,000
b. $64,000
d. $80,000
D, L & H 9e
37. Alpha Company has a standard fixed cost of $10 per unit. At an actual production of 16,000 units an unfavorable
volume variance of $20,000 resulted. What were total budgeted fixed costs? (E)
a. $140,000
c. $180,000
b. $160,000
d. $150,000
D, L & H 9e
32. 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: (M)
a. $96,000.
c. $100,000.
b. $102,400.
d. $98,600.
G & N 9e
Actual Output
38. Beta Company has a standard fixed cost of $10 per unit using a normal capacity of 11,000 units. An unfavorable
volume variance of $12,000 resulted. What was the volume produced? (E)
a. 9,800
c. 12,200
b. 11,000
d. 10,000
D, L & H 9e
48. Sigma Company has a standard fixed cost of $18 per unit using a normal capacity of 9,000 units. A favorable
volume variance of $18,000 resulted. What was the volume produced? (E)
a. 8,000
c. 10,000
b. 9,000
d. 9,500
D, L & H 9e
Budget and Volume Variance
Applied Overhead
40. OPAL Co. uses the two-way variance analysis for overhead performance. The budgeted factory overhead includes
monthly fixed costs of P1,200,000 plus variable costs of P96 per direct labor hour. Total standard direct labor hours
allowed for the May, 19x8 production was 43,200 hours. Analysis showed that, in May, 19x8, the controllable
variance of P24,000 is unfavorable while the volume variance of P12,000 is favorable. How much was the applied
factory overhead in May 19x8? (M)
a. P5,335,200
c. P5,359,200
b. P5,347,200
d. P5,371,200
RPCPA 0598
Actual and Applied Overhead
Problems 90 and 91 are based on the following information
RPCPA 0589
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.
*. The actual factory overhead incurred in January was (M)
a. P186,200
c. P181,500
b. P188,500
d. P103,500
*.
The applied factory overhead in January was (M)
a. P188,500
c. P186,200
b. P183,800
d. P103,500
Budget and Volume Variance
Questions 92 and 93 are based on the following information.
RPCPA 1078
Assuming actual factory overhead is P7,250; budgeted fixed overhead is P3,600; variable overhead rate is P2.00 per
hour and the standard hours in the product are 2,000 hours –
*. The controllable variance is (E)
a. unfavorable at P350
c. favorable at P350
b. unfavorable at P3,250
d. favorable at P3,250
*.
Using data given above, and assuming that the fixed factory overhead rate is P1.20 per hour – the volume variance
is (E)
a. P1,000
c. P1,400
b. P1,200
d. P1,600
Questions 94 and 95 are based on the following information.
RPCPA 0581
Roig Enterprises manufactures different types of aluminum products for different industries. Standard cost accounting
systems are used. The following data are available:
Actual total overhead
P40,000
Budgeted fixed costs
P10,200
Total overhead application rate per standard direct labor hour
P 2.50
Actual hours used
13,980
Normal activity in hours
12,000
Standard hours allowed
15,000
The company uses a two-way analysis of overhead variances.
*.
The controllable variance of Roig Enterprises is (M)
a. P2,500 favorable
c. P5,050 favorable
b. P2,550 unfavorable
d. P5,050 unfavorable
*.
The volume variance of Roig Enterprises is (M)
a. P2,550 favorable
c. P9,990 favorable
b. P2,550 unfavorable
d. P9,990 unfavorable
Questions 96 and 97 are based on the following information.
RPCPA 1080
Beacon Company manufactures various types of plastic and rubber coated tubing products for various industries.
Standard cost accounting system is used. The following are available:
Actual total overhead
P 44,000
Budgeted fixed costs
P 12,600
Total overhead application rate per standard direct labor hour
P 2.50
Actual hours used
16,000
Standard hours allowed
17,000
Normal activity in hours
14,000
The company uses a two-way analysis of overhead variances.
*.
The controllable variance of Beacon Company is (M)
a. P1,500 favorable.
c. P4,200 favorable.
b. P1,500 unfavorable.
d. P4,200 unfavorable.
*.
The volume variance of Beacon Company is (M)
a. P2,700 favorable.
c. P7,500 favorable.
b. P2,700 unfavorable.
d. P7,500 unfavorable.
Questions thru are based on the following information.
CMA adapted
J. R. Richard Company employs a standard absorption system for product costing. The standard cost of its product is
as follows:
Direct materials
$14.50
Direct labor (2 direct labor hours x $8)
16.00
Manufacturing overhead (2 direct labor hours x $11)
22.00
Total standard cost
$52.50
The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Richard planned to
produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is:
Variable
$3,600,000
Fixed
3,000,000
$6,600,000
During November, Richard produced 26,000 units. Richard used 53,500 direct labor hours in November at a cost of
$433,350. Actual manufacturing overhead for the month was $250,000 fixed and $325,000 variable.
131
. The manufacturing overhead controllable variance for November is (M)
A. $9,000 unfavorable
C. $9,000 favorable
B. $13,000 unfavorable
D. $4,000 favorable
132
. The manufacturing overhead volume variance for November is:(M)
A. $12,000 unfavorable
D. $9,000 unfavorable
B. $10,000 unfavorable
E. $1,000 favorable
C. $3,000 unfavorable
Comprehensive
Questions 116 through 118 are based on the following information.
L.J. McCarthy
Patie Company uses a standard FIFO, process-cost system to account for its only product, Mituea. Patie has found that
direct machine hours (DMH) provide the best estimate of the application of O/H. Four (4) standard direct machine hours
are allowed for each unit.
Using simple linear regression analysis in the form y = a + b(DMH), given that (A) equals fixed costs and (B) equals
variable costs, Patie has developed the following O/H budget for a normal activity level of 100,000 direct machine hours:
ITEM (y)
a
b
Supplies
$ 0.50
Indirect Labor
$ 54,750
6.50
Depreciation -- Plant and Equipment
27,000
Property Taxes and Insurance
32,300
Repairs and Maintenance
14,550
1.25
Utilities
3,400
4.75
Total O/H
$132,000
$13.00
Actual fixed O/H incurred was $133,250, and actual variable O/H was $1,225,000. Patie produced 23,500 equivalent
units during the year using 98,700 direct machine hours.
133
. What is the standard O/H rate? (M)
A. $13.00 per DMH.
B. $1.32 per DMH
C. $14.32 per DMH.
D. $13.76 per DMH.
134
. How much O/H should be applied to production? (M)
A. $1,413,384
C. $1,358,250
B. $1,432,000
D. $1,346,080
135
. What is the total O/H variance? (M)
A. $12,170 unfavorable.
B. $55,134 unfavorable.
C. $55,134 favorable.
D. $73,750 favorable.
Predetermined Overhead Rate and Applied Overhead
Questions 81 & 82 are based on the following information.
G & N 9e
A manufacturer of industrial equipment has a standard costing system based on machine-hours (MHs) as the measure
of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity .................
3,900 MHs
Overhead costs at the denominator activity level:
Variable overhead cost ......................
$33,345
Fixed overhead cost .........................
$61,425
The following data pertain to operations for the most recent period:
Actual hours
3,900 MHs
Standard hours allowed for the actual output
3,952 MHs
Actual total variable overhead cost
$32,565
Actual total fixed overhead cost
$60,675
81. What is the predetermined overhead rate to the nearest cent? (M)
a. $23.91
c. $24.30
b. $24.30
d. $23.91
82. How much overhead was applied to products during the period to the nearest dollar? (M)
a. $93,240
c. $96,034
b. $94,770
d. $94,770
Questions 83 & 84 are based on the following information.
G & N 9e
A manufacturer of industrial equipment has a standard costing system based on direct labor-hours (DLHs) as the
measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
8,000 DLHs
Overhead costs at the denominator activity level:
Variable overhead cost
$56,400
Fixed overhead cost
$100,800
The following data pertain to operations for the most recent period:
Actual hours
7,800 DLHs
Standard hours allowed for the actual output
7,735 DLHs
Actual total variable overhead cost
$54,210
Actual total fixed overhead cost
$100,200
83. What is the predetermined overhead rate to the nearest cent? (M)
a. $19.30
c. $19.80
b. $19.65
d. $20.15
84. How much overhead was applied to products during the period to the nearest dollar? (M)
a. $151,993
c. $157,200
b. $154,410
d. $153,270
Volume Variance & Over- (Under-) Applied Overhead
Questions 22 and 23 are based on the following information.
Factory overhead for the Cabanatuan Co. has been estimated as follows:
RPCPA 1079
Fixed overhead
P30,000
Variable overhead
90,000
Estimated direct labor hours
40,000
Production for the month reached 75% of the budget, and actual factory overhead totaled P86,000.
22. The over- (under-) applied factory overhead was (E)
a. P34,000
c. P4,000
b. (P4,000)
d. None of the above.
23. The favorable (unfavorable) idle capacity variance was (E)
a. P4,000
c. P7,500
b. (P7,500)
d. None of the above
THREE-WAY VARIANCE - CMA
Spending Variance
136
. Cara Williams, a supervisor, controls her department's costs. The following data relate to her department for the
month of June:
Factory Overhead
Budgeted
Actual
Variable
$100,000
$106,250
Fixed
31,250
33,750
What was the department's total spending variance for June? (E)
A. $8,750 U.
C. $3,750 F.
B. $6,250 U.
D. $2,500 U.
Gleim
70. Using the information presented below, calculate the total overhead spending variance. (E)
Budgeted
Actual
Units produced
5,000
4,500
Variable overhead (2 DLH at P2 per DLH)
P4/ unit
P19,500
Fixed overhead
P10,000
P10,300
Direct labor hours
10,000
9,500
A. P500 U
C. P1,000 U
B. P800 U
D. P1,300 U
Pol Bobadilla
137
. 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? (E)
a. $750 favorable.
c. $950 favorable.
b. $750 unfavorable.
d. $200 unfavorable.
AICPA 0578 I-32
138
. Coleman Company compiled the following information:
Actual factory overhead
$22,500
Fixed overhead expenses, actual
$10,800
Fixed overhead expenses, budgeted
$10,500
Actual hours
5,250
Standard hours
5,700
Variable overhead rate per DLH
$3.80
What is the spending variance assuming Coleman uses a three-way analysis of overhead? (E)
A. $9,660 unfavorable.
C. $7,950 favorable.
B. $8,250 favorable.
D. $7,950 unfavorable.
Variable Overhead Efficiency Variance
139
. The following information pertains to Roe Co.’s 2000 manufacturing operations:
Standard direct manufacturing labor hours per unit
2
Actual direct manufacturing labor hours
10,500
Number of units produced
5,000
Standard variable overhead per standard direct labor hour
$3
Actual variable overhead
$28,000
Roe’s 2000 unfavorable variable overhead efficiency variance was (E)
a. $0
c. $2,000
b. $1,500
d. $3,500
Gleim
AICPA 1192
140
. The following data relate to Tray Co.'s manufacturing operations:
Standard direct labor hours per unit
Actual direct labor hours
Number of units produced
Standard variable overhead per standard direct labor hour
Actual variable overhead
Tray's variable overhead efficiency variance is (E)
A. $0
C. $2,000 F.
B. $1,000 U.
D. $3,000 F.
3
24,500
8,000
$2
$46,000
Gleim
35. The following data are the actual results for Bustos Company for the month of May:
Actual output
4,500 units
Actual variable overhead
P360,000
Actual fixed overhead
P108,000
Actual machine time
14,000 MH
Standard cost and budget information for Bustos Company follows:
Standard variable overhead rate
P6.00 per MH
Standard quantity of machine hours
3 hours per unit
Budgeted fixed overhead
P777,600 per year
Budgeted output
4,800 unit per month
The overhead efficiency variance is (M)
a. P3,000 Favorable
c. P5,400 Favorable
b. P3,000 Unfavorable
d. P5,400 Unfavorable
Pol Bobadilla
Spending & Efficiency Variance
Questions 1 and 2 are based on the following information.
Carter & Usry
The following information relates to Department 1 of Ruiz Company for the fourth quarter. The total overhead variance is
divided into three variances: spending, variable efficiency, and volume.
Actual total overhead (fixed plus variable)
$178,500
Budget formula
$110,000+ $.50 per hour
Total overhead application rate
$1.50 per hour
Actual hours worked
121,000
141
. What was the spending variance in this department during the quarter? (E)
A. $8,000 favorable
C. $8,000 unfavorable
B. $4,500 favorable
D. $4,500 unfavorable
142
. What was the variable efficiency variance in this department during the quarter?
A. $4,500 favorable
C. $4,500 unfavorable
B. $8,000 favorable
D. $8,000 unfavorable
Actual Fixed oOerhead and Overhead Efficiency Variance
Questions 1 and 2 are based on the following information.
Flamholtz & Diamond
Meldouville Company has just finished reviewing the results of its operations for the current period. The company’s chief
accountant told management that the total overhead spending variance was unfavorable by $1,000. However, the
variable overhead portion of this variance was favorable by $200. The company’s volume variance, according to the
accountant, was favorable by $300. During the period Medouville applied $1,800 of fixed overhead to production. The
adjustment at the end of the period to allocate under-or-overapplied overhead included a debit of $200 to the Factory
Overhead Control account.
.
Meldouville’s actual fixed overhead costs for the period amounted to (M)
A. $3,300
C. $900
B. $300
D. $2,700
.
Meldouville’s overhead efficiency variance for the period was (M)
A. $900 favorable.
C. $1,500 favorable.
B. $1,100 favorable.
D. $500 unfavorable.
Comprehensive
Questions 1 thru 5 are based on the following information.
Beebo Company uses a standard cost system as a means of control for their manufacturing business. The firm has
done an analysis of its overhead cost behavior patterns relative to its activity base of direct labor hours (DLH), and
reports the following findings:
Variable overhead
Indirect material
$1.20 per DLH
Indirect labor
2.15 per DLH
Other indirect costs
3.45 per DLH
Annual Fixed Costs
Salaries
$100,000
Depreciation
14,000
Rent
30,000
Beebo’s annual budget is based on total production of 240,000 units, for which 2.5 DLH per unit is required. It may be
assumed that Beebo’s fixed costs and production activity occur evenly throughout the year.
During its first month of operations in the current year Beebo produced 22,000 units, logged 57,200 direct labor
hours,and reported the following cost figures.
Actual variable overhead costs
$360,000
Total fixed costs
14,000
.
Beebo’s predetermined overhead application rate is (M)
A. $6.80 per DLH
D. $9.40 per DLH
B. $7.04 per DLH
E. $9.76 per DLH
C. $8.14 per DLH
.
Beebo’s overhead speanding variance for the month is (M)
A. $10,000 unfavorable.
D. $28,688 favorable.
B. $22,000 unfavorable.
E. $40,688 favorable.
C. $26,960 favorable.
.
Beebo’s overhead efficiency variance for the month is (M)
A. $14,960 unfavorable.
D. $48,960 favorable.
B. $15,488 unfavorable.
E. $50,688 favorable.
C. $27,200 favorable.
.
Beebo’s overhead volume variance for the month is (M)
A. $528 unfavorable.
D. $34,000 favorable.
B. $1,200 favorable.
E. $35,200 favorable.
C. $1,728 unfavorable.
.
Beebo’s overhead for the month was (M)
A. Overapplied by $28,688
B. Underapplied by $22,000
C. Overapplied by $13,200
D. Overapplied by $14,960
E. Underapplied by $34,000
Questions 106 through 109 are based on the following information.
RPCPA 1084
Standard costs and budgetary control methods must be closely related. This relationship is particularly applicable for
factory overhead. A flexible budget allows better control over factory overhead than a fixed budget. The flexible budget
for Sta. Maria Corporation is presented below:
Percent of Normal Operating Capacity
80%
90%
100%*
110%
Variable overhead
P 72,000
P 81,000
P 90,000
P 99,000
Fixed overhead
45,000
45,000
45,000
45,000
Total factory overhead
P117,000
P126,000
P135,000
P144,000
* Normal capacity
In accordance with standards established, 90,000 units of product should be manufactured when the company operates
its normal capacity. The standard labor time per unit of product is 20 minutes.
Actual production in 1983 was 75,000 units of product in 24,000 hours.
*. What is the standard variable factory overhead rate per hour? (M)
a. P1.00
c. P3.00
b. P2.00
d. P4.50
*.
What is the budgeted factory overhead adjusted to standard hours allowed for units actually produced? (M)
a. P112,500
c. P120,000
b. P117,000
d. P135,000
*.
What is the budgeted factory overhead adjusted to actual hours worked. (M)
a. P112,500
c. P120,000
b. P117,000
d. P135,000
*.
What is the factory overhead applied to production (based on standard hours? (M)
a. P112,500
c. P120,000
b. P117,000
d. P135,000
THREE-WAY VARIANCE – Spending, Idle Capacity & Efficiency Variance
Questions 1 through 7 are based on the following information.
RPCPA 0593
The U. R. Good Company manufactures a product, using standard costs as follows:
1. Standard costs per unit:
Material
- 7 kilos at P3.50 per kilo
Labor
- 8 hours at P1.75 per hour
Overhead: Fixed
- P1.15 per hour or P9.20 per unit
Variable
- P0.85 per hour or P6.80 per unit
2. Overhead applied on direct labor hours
3. Actual performance (one month)
a) Volume produced
- 800
b) Labor hours
- 6,300
c) Overhead
- P13,200
d) Material cost
- P3.45 per kilo
e) Labor cost
- P1.80 per hour
f) Material used
- 4,800 kilos
1. Material price variance is (E)
a. P 240 favorable.
c. P240 unfavorable.
b. P2,800 unfavorable.
d. P360 favorable.
2. Labor rate variance is (E)
a. P400 favorable.
b. P315 unfavorable.
c. P175 favorable.
d. P500 unfavorable
3. Total material variance is (E)
a. P2,800 favorable.
b. P2,800 unfavorable.
c. P3,000 unfavorable.
d. P3,040 favorable.
4. Total overhead variance is (E)
a. P200 favorable.
b. P500 favorable.
c. P400 unfavorable.
d. P400 favorable.
5. Material quantity variance is (E)
a. P200 favorable.
b. P250 unfavorable.
c. P240 favorable.
d. P2,800 favorable.
6. Overhead idle capacity variance is
a. P435 favorable.
b. P435 unfavorable.
c. P1,035 unfavorable.
d. P1,035 favorable.
7. Overhead efficiency variance is
a. P435 favorable.
b. 200 favorable.
c. P435 unfavorable.
d. 200 unfavorable.
FOUR-WAY VARIANCE
Flexible Variable Budget (Based on Actual Output)
*. Pranic Corp. uses flexible budgeting for cost control. It produced 5,400 units of product for the month just ended
incurring an indirect materials cost of P26,000. Its master budget for the year showed an indirect materials cost of
P360,000 at a production volume of 72,000 units. A flexible budget for the month’s production would show indirect
material cost of (E)
a. P27,000
c. P27,950
b. P26,000
d. P23,400
RPCPA 0597
143
. RedRock Company uses flexible budgeting for cost control. RedRock produced 10,800 units of product during
March, incurring an indirect materials cost of $13,000. Its master budget for the year reflected an indirect materials
cost of $180,000 at a production volume of 144,000 units. A flexible budget for March production should reflect
indirect materials costs of (E)
a. $13,000
c. $13,975
b. $13,500
d. $11,700
CMA 1291 3-26
5. For the period just ended, LAMBDA Co. budgeted its variable overhead at P40 per direct labor hour and fixed
overhead at P480,000. Budgeted production volume was 8,000 units and the production time, which was the basis
for allocation of variable and fixed overhead, was budgeted at 0.80 hour per unit. The actual results for the period
were: fixed overhead, P552,000; variable overhead, P283,480; units produced, 7,460; direct labor hours used,
5,595. What was the budgeted variable overhead for the actual volume attained? (M)
a. P223,800
c. P238,720
b. P226,784
d. P283,480
RPCPA 1094
Variable Overhead Spending Variance
45 Antaya Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead.
Antaya has budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $388,000
fixed overhead, and $98,600 variable overhead. The variable overhead spending variance for the year is (E)
a. $1,400
c. $37,200.
b. $8,600
d. $15,600.
L & H 10e
49. Barron Company has a standard variable costs as follows:
Materials, 3 pounds at $4.00 per pound
Labor, 2 hours at $10.00 per hour
Variable overhead, $7.50 per labor hour
$12.00
20.00
15.00
$47.00
During September, Barron produced 5,000 units, using 9,640 labor hours at a total wage of $94,670 and incurring
$78,600 in variable overhead. The variable overhead spending variance is (E)
a. $6,300 unfavorable.
c. $2,700 favorable.
b. $3,600 unfavorable.
d. Some other number.
D, L & H 9e
56. The following standards for variable manufacturing overhead have been established for a company that makes only
one product:
Standard hours per unit of output
5.6 hours
Standard variable overhead rate
$12.00 per hour
The following data pertain to operations for the last month:
Actual hours
2,600 hours
Actual total variable overhead cost
$31,330
Actual output
400 units
What is the variable overhead spending variance for the month? (E)
a. $112 F
c. $4,450 U
b. $130 U
d. $4,338 U
G & N 9e
53. The following standards for variable manufacturing overhead have been established for a company that makes only
one product:
Standard hours per unit of output
1.2 hours
Standard variable overhead rate
$19.80 per hour
The following data pertain to operations for the last month:
Actual hours
2,100 hours
Actual total variable overhead cost
$40,740
Actual output
1,600 units
What is the variable overhead spending variance for the month?
A. $2,724 U
C. $840 F
B. $3,492 U
D. $768 U
G & N 10e
31. Tyro Company has a standard cost system in which it applies manufacturing overhead to units of product on the
basis of direct labor hours (DLHs). The following information is available:
Actual total overhead costs
$15,000
Actual fixed overhead costs
$ 7,200
Budgeted fixed overhead costs
$ 7,000
Actual hours worked
3,500 DLHs
Standard hours allowed for the output
3,800 DLHs
Variable overhead rate
$2.50 per DLH
Based on these data, what is the variable overhead spending variance? (M)
a. $1,700 favorable.
c. $950 favorable.
b. $750 unfavorable.
d. $1,500 unfavorable.
AICPA, Adapted
33. Baltimore, Inc. analyzes manufacturing overhead in the production of its only one product, Blu. The following set of
information applies to the month of May, 2003:
Budgeted
Actual
Units produced
40,000
38,000
Variable manufacturing overhead
P4/DLH
P16,400
Fixed manufacturing overhead
P20/DLH
P88,000
Direct labor hours
6 minutes/unit
4,200 hours
How much was the variable overhead spending variance?
a. P400 Favorable
c. P1,200 Favorable
b. P400 Unfavorable
d. P1,200 Unfavorable
Pol Bobadilla
Standard Variable Overhead Rate
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: (M)
a. $1.20.
c. $1.275.
b. $1.25.
d. $1.225.
G & N 9e
29. At Jacobson Company, indirect labor is a variable cost that varies with direct labor hours. Last month's performance
report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance
was $245 F. If 24,100 direct labor hours were actually worked last month, then the flexible budget cost formula for
indirect labor must be (per direct labor hour): (M)
a. $0.20.
c. $0.30.
b. $0.25.
d. $0.35.
G & N 9e
28. At Eady Company, maintenance is a variable cost that varies directly with machine-hours. The performance report
for July showed that actual maintenance costs totaled $8,650 and that the associated spending variance was $250
unfavorable. If 5,000 machine-hours were actually worked during July, the budgeted maintenance cost per machinehour was: (M)
A. $1.73.
C. $1.68.
B. $1.78.
D. $1.83.
G & N 10e
Variable Overhead Spending Variance & Overhead Rate
Questions 93-94 are based on the following information:
G & N 10e
The Richie Company employs a standard costing system in which variable manufacturing overhead is assigned to
production on a basis of number of machine setups. Data for the month of October include the following:
 Variable manufacturing overhead cost incurred: $42,750
 Total variable overhead variance: $5,430 favorable
 Standard machine setups allowed for actual production: 2,920 setups
 Actual machine setups incurred: 2,850 setups
93. The standard variable overhead rate per machine setup is: (M)
A. $16.91.
C. $15.00.
B. $12.78.
D. $16.50.
94. The variable overhead spending variance is: (M)
A. $4,275 favorable.
C. $1,050 unfavorable.
B. $4,275 unfavorable.
D. $1,050 favorable.
Variable Overhead Efficiency Variance
144
. Compute the variable efficiency variance, using the following data: (E)
Standard labor hours per good unit produced
Good units produced
Actual labor hours used
Standard variable overhead per standard labor hour
Actual variable overhead
A. $200 favorable
C. $300 favorable
B. $200 unfavorable
D. $300 unfavorable
49. Barron Company has a standard variable costs as follows:
Materials, 3 pounds at $4.00 per pound
Labor, 2 hours at $10.00 per hour
Variable overhead, $7.50 per labor hour
2
1,000
2,100
$3
$6,500
CIA adapted
$12.00
20.00
15.00
$47.00
During September, Barron produced 5,000 units, using 9,640 labor hours at a total wage of $94,670 and incurring
$78,600 in variable overhead. The variable overhead efficiency variance is (E)
a. $6,300 unfavorable.
c. $2,700 favorable.
b. $3,600 unfavorable.
d. Some other number.
D, L & H 9e
55. The following standards for variable manufacturing overhead have been established for a company that makes only
one product:
Standard hours per unit of output ......
7.8 hours
Standard variable overhead rate ........
$12.55 per hour
The following data pertain to operations for the last month:
Actual hours ...........................
2,900 hours
Actual total variable overhead cost ....
$36,975
Actual output ..........................
200 units
What is the variable overhead efficiency variance for the month? (E)
a. $17,397 U
c. $312 F
b. $16,817 U
d. $17,085 U
G & N 9e
52. The following standards for variable manufacturing overhead have been established for a company that makes only
one product:
Standard hours per unit of output
3.5 hours
Standard variable overhead rate
$15.20 per hour
The following data pertain to operations for the last month:
Actual hours
3,800 hours
Actual total variable overhead cost
$59,090
Actual output
800 units
What is the variable overhead efficiency variance for the month?
A. $15,550 U
C. $16,530 U
B. $15,200 U
D. $980 F
G & N 10e
Actual Direct Labor Hours
65. The following information relates to Orc Company’s 2003 manufacturing activities:
Standard direct labor hours per unit
2
Number of units produced
5,000
Standard variable overhead per standard direct labor hours
P3
Actual variable overhead
P28,000
Unfavorable overhead efficiency variance
P1,500
The number of actual direct labor hours are (M)
A. 10,500
C. 11,000
B. 10,000
D. Indeterminate
Pol Bobadilla
Variable Overhead Budget Variance
145
. A company's flexible budget shows an expected variable delivery expense of $160,000 when sales are 50,000 units.
If sales total 52,000 units, and the actual delivery expense is $163,000, what will be the flexible budget variance for
delivery expense? (E)
A. $3,000 unfavorable.
C. $3,000 favorable.
B. $3,400 unfavorable.
D. $3,400 favorable.
Gleim
146
. Baxter Corporation's master budget calls for the production of 5,000 units of product monthly. The master budget
includes indirect labor of $144,000 annually; Baxter considers indirect labor to be a variable cost. During the month
of April, 4,500 units of product were produced, and indirect labor costs of $10,100 were incurred. A performance
report utilizing flexible budgeting would report a budget variance for indirect labor of (E)
A. $1,900 unfavorable.
C. $1,900 favorable.
B. $700 favorable.
D. $700 unfavorable.
CMA 0687 4-18
49. Barron Company has a standard variable costs as follows:
Materials, 3 pounds at $4.00 per pound
$12.00
Labor, 2 hours at $10.00 per hour
Variable overhead, $7.50 per labor hour
20.00
15.00
$47.00
During September, Barron produced 5,000 units, using 9,640 labor hours at a total wage of $94,670 and incurring
$78,600 in variable overhead. The variable overhead budget variance is (E)
a. $6,300 unfavorable.
c. $2,700 favorable.
b. $3,600 unfavorable.
d. Some other number.
D, L & H 9e
Variable Overhead Spending Variance
. 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. (M)
a. P500 unfavorable.
c. P500 favorable.
b. P2,000 favorable.
d. P2,000 unfavorable.
RPCPA 1001
Variable Overhead Spending Variance & Budget Variance
Standard Hours
54. The Waters Company has a standard costing system. Variable manufacturing overhead is assigned to production
on the basis of machine hours. The following data are available for July:
 Actual variable manufacturing overhead cost incurred: $45,240
 Actual machine hours worked: 3,200
 Variable overhead spending variance: $6,840 unfavorable
 Total variable overhead variance: $9,240 unfavorable
The standard number of machine hours allowed for July production is:
A. 3,200 hours.
C. 3,400 hours.
B. 3,000 hours.
D. 4,540 hours.
G & N 10e
Comprehensive
Variable Overhead Flexible Budget Variance & Spending Variance
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 57 AND 58.
Horngren
Kellar Corporation manufactured 1,500 chairs during June. The following variable overhead data pertain to June.
Budgeted variable overhead cost per unit
$ 12.00
Actual variable manufacturing overhead cost
$16,800
Flexible-budget amount for variable manufacturing overhead
$18,000
Variable manufacturing overhead efficiency variance
$360 unfavorable
147
. What is the variable overhead flexible-budget variance? (E)
a. $1,200 favorable
c. $1,560 favorable
b. $360 unfavorable
d. $1,200 unfavorable
148
. What is the variable overhead spending variance? (E)
a. $840 unfavorable
c. $1,200 unfavorable
b. $1,200 favorable
d. $1,560 favorable
Variable Overhead Flexible Budget Variance & Efficiency Variance
Questions xx thru xx are based on the following information.
H&M
Gem Company’s standard variable overhead rate is $3 per direct labor hour, and each unit requires 2 standard direct
labor hours. During October, Gem recorded 12,000 actual direct labor hours, $37,000 actual variable overhead costs,
and 5,800 units of product manufactured.
. What is the total variable overhead budget variance for October for Gem? (E)
a. $1,200 (U)
d. $2,200 (F)
b. $600 (U)
e. $2,200 (U)
c. $1,000 (U)
149
. What is the variable overhead efficiency variance for October for Gem? (E)
a. $2,200 (U)
d. $1,200 (U)
b. $2,200 (F)
e. $1,000 (U)
c. $600 (U)
150
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 59 AND 60.
Horngren
Patel Corporation manufactured 1,000 coolers during October. The following variable overhead data pertain to October.
Budgeted variable overhead cost per unit
$ 9.00
Actual variable manufacturing overhead cost
$8,400
Flexible-budget amount for variable manufacturing overhead
$9,000
Variable manufacturing overhead efficiency variance
$180 unfavorable
151
. What is the variable overhead flexible-budget variance? (E)
a. $600 favorable
c. $780 favorable
b. $420 unfavorable
d. $600 unfavorable
152
. What is the variable overhead spending variance? (E)
a. $420 unfavorable
c. $600 unfavorable
b. $600 favorable
d. $780 favorable
Variable Overhead Spending & Efficiency Variance
Questions 10 and 11 are based on the following information.
Pol Bobadilla
The Huber Company produces a pesticide. At the beginning of the year, Huber had the following standard cost sheet:
Direct materials (5 lbs. @ P11.60)
P 80.00
Direct labor (1.5 hrs @ P90.00)
135.00
Fixed overhead (1.5 hrs @ P20.00)
30.00
Variable overhead (1.5 hrs. @ P15.00)
22.00
Standard cost per unit
P267.50
The Huber Company computes its overhead rates using practical volume, which is 36,000 units. The actual results for
the year are:

Units produced, 35,000 units.

Materials purchased, 186,000 pounds @ P15.

Materials used, 180,000 pounds.

Direct labor, 53,000 hours @ P89.50

Fixed overhead, P725,000.

Variable overhead, P802,500
10. The amount of variable overhead spending variance is: (E)
A. P15,000 U
C. P15,000 F
B. P7,500 U
D. P7,500 F
11. The amount of variable overhead efficiency variance is (E)
A. P7,500 F
C. P7,500 U
B. P15,000 F
D. P15,000 U
Questions 91-92 are based on the following information:
G & N 10e
The following standards for variable manufacturing overhead have been established for a company that makes only one
product:
Standard hours per unit of output
7.0 hours
Standard variable overhead rate
$11.35 per hour
The following data pertain to operations for the last month:
Actual hours
Actual total variable overhead cost
Actual output
7,500 hours
$87,000
1,000 units
91. What is the variable overhead spending variance for the month? (E)
A. $7,550 F
C. $1,875 F
B. $7,550 U
D. $1,875 U
92. What is the variable overhead efficiency variance for the month? (E)
A. $5,800 F
C. $1,750 F
B. $5,800 U
D. $5,675 U
Questions 89-90 are based on the following information:
G & N 10e
The following standards for variable manufacturing overhead have been established for a company that makes only one
product:
Standard hours per unit of output
8.1 hours
Standard variable overhead rate
$14.85 per hour
The following data pertain to operations for the last month:
Actual hours
8,600 hours
Actual total variable overhead cost
$130,720
Actual output
1,000 units
89. What is the variable overhead spending variance for the month? (E)
A. $3,010 F
C. $10,435 U
B. $3,010 U
D. $10,435 F
90. What is the variable overhead efficiency variance for the month? (E)
A. $7,600 F
C. $7,600 U
B. $2,835 F
D. $7,425 U
Questions 74-75 are based on the following information:
G & N 10e
A manufacturing company that has only one product has established the following standards for its variable
manufacturing overhead. The company uses direct labor-hours (DLHs) as its measure of activity.
Standard hours per unit of output
3.6 DLHs
Standard variable overhead rate
$15.35 per DLH
The following data pertain to operations for the last month:
Actual direct labor-hours
Actual total variable overhead cost
Actual output
7,300 DLHs
$112,785
1,800 units
74. What is the variable overhead spending variance for the month? (E)
A. $13,317 U
C. $730 F
B. $730 U
D. $13,317 F
75. What is the variable overhead efficiency variance for the month? (E)
A. $12,669 F
C. $12,669 U
B. $648 F
D. $12,587 U
Questions 98 & 99 are based on the following information.
G & N 9e
The following standards for variable manufacturing overhead have been established for a company that makes only one
product:
Standard hours per unit of output ......
1.6 hours
Standard variable overhead rate ........
$11.55 per hour
The following data pertain to operations for the last month:
Actual hours ...........................
4,900 hours
Actual total variable overhead cost ....
Actual output ..........................
$58,310
3,000 units
98. What is the variable overhead spending variance for the month? (E)
a. $2,870 U
c. $1,715 U
b. $2,870 F
d. $1,715 F
99. What is the variable overhead efficiency variance for the month? (E)
a. $1,680 F
c. $1,155 U
b. $1,190 U
d. $1,190 F
Questions 65 & 66 are based on the following information.
G & N 9e
A manufacturing company that has only one product has established the following standards for its variable
manufacturing overhead. The company uses machine-hours as its measure of activity.
Standard hours per unit of output
8.1 machine-hours
Standard variable overhead rate
$14.30 per machine-hour
The following data pertain to operations for the last month:
Actual hours ...........................
Actual total variable overhead cost ....
Actual output ..........................
1,700 machine-hours
$24,905
200 units
65. What is the variable overhead spending variance for the month? (E)
a. $1,739 U
c. $595 U
b. $595 F
d. $1,739 F
66. What is the variable overhead efficiency variance for the month? (E)
a. $1,172 F
c. $1,172 U
b. $567 F
d. $1,144 U
Questions 67 & 68 are based on the following information.
G & N 9e
A manufacturing company that has only one product has established the following standards for its variable
manufacturing overhead. The company uses direct labor-hours (DLHs) as its measure of activity.
Standard hours per unit of output
7.2 DLHs
Standard variable overhead rate
$14.20 per DLH
The following data pertain to operations for the last month:
Actual direct labor-hours
Actual total variable overhead cost
Actual output
5,100 DLHs
$72,165
600 units
67. What is the variable overhead spending variance for the month?(E)
a. $10,821 U
c. $10,821 F
b. $255 U
d. $255 F
68. What is the variable overhead efficiency variance for the month?(E)
a. $11,076 U
c. $11,037 U
b. $11,037 F
d. $216 U
Fixed Overhead Flexible Budget
26. Aurora applies overhead at $8 per direct labor hour of which $3 is variable overhead. Budgeted direct labor hours
were 90,000. Budgeted fixed overhead was (E)
a. $270,000
c. $720,000
b. $450,000
d. None of the above.
D, L & H 9e
*.
Broker Corp.’s budget shows straight-line depreciation on machinery of P516,000 based on the annual production
volume of 103,200 units of product. In July, it produced 8,170 units of product, and the accounts had actual
depreciation on machinery of P41,000. It controls manufacturing costs with a flexible budget. The flexible budget
for the depreciation of the machine for July is (M)
a. P38,950
c. P41,000
b. P43,000
d. P40,850
RPCPA 0596
153
. Simson Company's master budget shows straight-line depreciation on factory equipment of $258,000. The master
budget was prepared at an annual production volume of 103,200 units of product. This production volume is
expected to occur uniformly throughout the year. During September, Simson produced 8,170 units of product, and
the accounts reflected actual depreciation on factory machinery of $20,500. Simson controls manufacturing costs
with a flexible budget. The flexible budget amount for depreciation on factory machinery for September would be (M)
A. $19,475.
C. $20,500.
B. $20,425.
D. $21,500.
CMA 0686 4-23
Fixed Overhead Spending (Budget) Variance
154
. A company's flexible budget shows an expected fixed cost of $100,000 for straight-line depreciation when sales total
50,000 units. If sales total 52,000 units, and the actual cost of depreciation is $103,000, what will be the budget
variance? (E)
A. $1,000 favorable.
C. $1,000 unfavorable.
B. $3,000 favorable.
D. $3,000 unfavorable.
Gleim
. Selo Imports uses flexible budgeting for the control of costs. The company’s annual master budget includes
$324,000 for fixed production supervisory salaries at a volume of 180,000 units. Supervisory salaries are expected
to be incurred uniformly through the year. During September, 15,750 units were produced and production
supervisory salaries incurred were $28,000. A performance report for September should reflect a budget variance
of (E)
a. $350 F
c. $1,000 U
b. $350 U
d. $1,000 F
CMA 0687 4-17
155
36. Jaune Company uses a standard cost system in which it applies manufacturing overhead to units of product on the
basis of direct labor hours (DLHs). The following data pertain to last month's operations:
Budgeted fixed overhead costs
$5,000
Actual fixed overhead costs
$5,500
Standard hours allowed for output
2,400 DLHs
Predetermined overhead rate ($2 variable+ $3 fixed)
$5 per DLH
The fixed overhead budget variance is: (E)
a. $500 U.
b. $500 F.
c. $2,200 U.
d. $1,700 U.
G & N 9e
35. Mauve Company uses a standard cost system in which it applies manufacturing overhead to units of product on the
basis of direct labor hours (DLHs). The following data pertain to last month:
Actual hours worked
2,400 DLHs
Budgeted fixed overhead costs
$10,000
Actual fixed overhead costs
$10,400
Standard hours allowed
2,500 DLHs
Predetermined overhead rate
$5 per DLH
The fixed overhead budget variance is: (E)
a. $400 U.
b. $500 F.
c. $300 F.
d. $300 U.
G & N 9e
36. Long Company analyzes its manufacturing overhead in the production of its only one product, Shorts. The following
set of information applies to the month of January 2004:
Budgeted
Actual
Units produced
Variable manufacturing overhead
Fixed manufacturing overhead
Direct labor hours
40,000
P4/DLH
P20/DLH
6 minutes/unit
38,000
P16,400
P85,000
4,000 hours
What is the fixed overhead spending variance? (M)
a. P5,000 Favorable
c. P1,600 Unfavorable
b. P1,600 Favorable
d. P5,000 Unfavorable
Pol Bobadilla
Volume Variance
Fixed Overhead Rate & Volume Variance
Questions 76-77 are based on the following information:
G & N 10e
The Forkes Company uses a standard cost system in which overhead costs are applied to products on the basis of
direct labor-hours (DLHs). The following data applied to the company's activities for the month of June:
Actual fixed overhead cost incurred
$161,450
Denominator activity
50,000 DLHs
Number of units completed
21,000 Units
Fixed overhead budget variance
$11,450 Unfavorable
Standard direct labor-hours per unit
3 DLHs
76. The fixed portion of the predetermined overhead rate for June is: (E)
A. $3.00.
C. $3.78.
B. $3.23.
D. $3.46.
77. The volume variance for June is: (E)
A. $44,954 Unfavorable.
B. $39,000 Favorable.
C. $39,000 Unfavorable.
D. $44,954 Favorable.
Questions 78-79 are based on the following information:
G & N 10e
The Malcolm Company uses a standard cost system in which manufacturing overhead costs are applied to products on
the basis of direct labor-hours (DLHs). The standards call for 3 hours of direct labor per unit produced. The following
data pertain to the company's manufacturing overhead for the month of July:
Actual fixed overhead cost incurred
$28,450
Denominator activity
8,400 DLHs
Number of units produced
2,900 units
Budget variance
$3,250 Unfavorable
78. The fixed portion of the predetermined overhead rate for June is: (E)
A. $3.11.
C. $3.77.
B. $3.39.
D. $3.00.
79. The volume variance for July is: (E)
A. $1,131 F.
B. $900 F.
C. $1,131 U.
D. $900 U.
Budgeted Fixed Overhead & Applied Fixed Overhead
Questions 94 & 95 are based on the following information.
G & N 9e
The Tate Company uses a standard costing system in which manufacturing overhead is applied to units of product on
the basis of direct labor hours (DLHs). The company recorded the following costs and activity for September:
Cost:
Actual fixed overhead costs incurred
$61,400
Volume variance
$2,850 Unfavorable
Fixed portion of the predetermined overhead rate
$0.95 per DLH
Activity:
Number of units completed
Standard direct labor hours allowed per unit of product
Denominator activity
22,800
2.5 DLHs
60,000 DLHs
94. The amount of fixed manufacturing overhead cost applied to work in process during September was: (E)
a. $61,400.
c. $54,150.
b. $57,000.
d. $59,850.
95. The amount of fixed overhead cost contained in the company’s flexible budget for manufacturing overhead for
September was: (E)
a. $61,400.
c. $60,000.
b. $57,000.
d. $58,550.
Budgeted Fixed Overhead & Denominator Hours
Questions 79 & 80 are based on the following information.
G & N 9e
The Claus Company makes and sells a single product and uses standard costing. During January, the company actually
used 8,700 direct labor-hours (DLHs) and produced 3,000 units of product. The standard cost card for one unit of
product includes the following:
Variable factory overhead:
3.0 DLHs @ $4.00 per DLH.
Fixed factory overhead:
3.0 DLHs. @ $3.50 per DLH.
For January, the company incurred $22,000 of actual fixed overhead costs and recorded a $875 favorable volume
variance.
79. The budgeted fixed factory overhead cost for January is: (E)
a. $31,500.
c. $32,375.
b. $30,625.
d. $33,250.
80. The denominator level of activity in direct labor-hours (DLHs) used by Claus in setting the predetermined overhead
rate for January is: (E)
a. 9,500 DLHs.
c. 8,750 DLHs.
b. 9,250 DLHs.
d. 10,500 DLHs.
Budgeted Fixed Overhead, Applied Fixed Overhead & Fixed Overhead Budget Variance
Questions 40 thru 42 are based on the following information.
G & N 9e
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.
40. The amount of fixed overhead contained in the company's overhead flexible budget for May was: (E)
a. $64,125.
c. $68,400.
b. $67,500.
d. $70,275.
41. The amount of fixed manufacturing overhead cost applied to work in process during May was: (E)
a. $61,725.
c. $42,750.
b. $62,700.
d. $64,125.
42. The fixed overhead budget variance for May was: (E)
a. $2,400 U.
c. $6,000 U.
b. $2,400 F.
d. $6,000 F.
Questions 103-105 are based on the following information:
G & N 10e
The Murray Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct
labor-hours (DLHs). The standard calls for 1.5 direct labor-hours per unit of product. The company recorded the following
activity and cost data for May:
Activity:
Number of units produced
40,100 Units
Denominator activity
64,000 DLHs
Cost:
Actual fixed overhead costs incurred
$56,000
Volume variance
$3,465 Unfavorable
Fixed portion of the predetermined overhead rate
$0.90 per DLH
103.The amount of fixed overhead contained in the company's budget for May was: (E)
A. $54,135.
C. $59,465.
B. $60,150.
D. $57,600.
104.The amount of fixed manufacturing overhead cost applied during May was: (E)
A. $52,535.
C. $36,090.
B. $54,135.
D. $50,400.
105.The fixed overhead budget variance for May was: (E)
A. $8,000 F.
C. $1,600 F.
B. $8,000 U.
D. $1,600 U.
Questions 100-102 are based on the following information:
G & N 10e
The Chase Company has a standard cost system in which manufacturing overhead is applied to units of product on the
basis of direct labor-hours (DLHs). The company recorded the following activity and cost data relating to manufacturing
overhead for October:
Activity:
Number of units completed
31,200 Units
Standard direct labor-hours per unit
1.6 DLHs
Denominator activity
54,000 DLHs
Cost:
Actual fixed overhead costs incurred
$51,300
Volume variance
$3,468 Unfavorable
Fixed portion of the predetermined overhead rate
$0.85 per DLH
100.The amount of fixed overhead cost contained in the company's overhead budget for September was: (E)
A. $45,900.
C. $49,920.
B. $54,768.
D. $47,703.
101.The amount of fixed manufacturing overhead cost applied to work in process during September was: (E)
A. $47,832.
C. $42,432.
B. $26,520.
D. $43,605.
102.The fixed overhead budget variance for September was: (E)
A. $2,700 favorable.
C. $5,400 favorable.
B. $2,700 unfavorable.
D. $5,400 unfavorable.
Fixed Overhead Spending Variance & Volume Variance
69. STA Company’s standard fixed overhead cost is P3 per direct labor hours based on budgeted fixed costs of
P300,000. The standard allows 2 direct labor hours per unit. During 2001, STA produced 55,000 units of product,
incurred P315,000 of fixed overhead costs, and recorded 106,000 actual hours of direct labor. What are the fixed
overhead variances? (E)
Pol Bobadilla
Fixed OH Spending Variance
Fixed OH Volume Variance
A.
P15,000 U
P30,000 F
B.
P33,000 U
P30,000 F
C.
P15,000 U
P18,000 F
D.
P33,000 U
P18,000 F
Questions 63 & 64 are based on the following information.
Pol Bobadilla
Baltimore, Inc. analyzes manufacturing overhead in the production of its only one product, Blu. The following set of
information applies to the month of May, 2003:
Budgeted
Actual
Units produced
40,000
38,000
Variable manufacturing overhead
P4/DLH
P16,400
Fixed manufacturing overhead
P20/DLH
P88,000
Direct labor hours
6 minutes/unit
4,200 hours
63. What is the fixed overhead spending variance? (E)
A. P4,000 Favorable
C. P8,000 Unfavorable
B. P8,000 Favorable
D. P4,000 Unfavorable
64. What is the volume variance?(E)
A. P4,000 Favorable
B. P4,000 Unfavorable
C. P8,000 Favorable
D. P8,000 Unfavorable
Questions 88 & 89 are based on the following information.
G & N 9e
Jessep Corporation has a standard cost system in which manufacturing overhead is applied to units of product on the
basis of direct labor hours. The company has provided the following data concerning its fixed manufacturing overhead
costs in March:
Denominator hours ......................
15,000 hours
Actual hours worked ....................
14,000 hours
Standard hours allowed for the output ..
12,000 hours
Flexible budget fixed overhead cost ....
$45,000
Actual fixed overhead costs ............
$48,000
88. The fixed overhead budget variance is: (E)
a. $1,000 U.
b. $3,000 U.
c. $2,000 U.
d. $2,000 F.
89. The fixed overhead volume variance is (E)
a. $3,000 U.
b. $3,000 F.
c. $9,000 U.
d. $6,000 U.
Questions 108-109 are based on the following information:
G & N 10e
An outdoor barbecue grill manufacturer has a standard costing system based on machine-hours (MHs) as the measure
of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
6,900 MHs
Fixed overhead cost
$95,565
The following data pertain to operations for the most recent period:
Actual hours
Standard hours allowed for the actual output
Actual total fixed overhead cost
7,300 MHs
7,084 MHs
$94,565
108.What was the fixed overhead budget variance for the period to the nearest dollar? (E)
A. $2,798 F
C. $3,548 U
B. $6,540 U
D. $1,000 F
109.What was the fixed overhead volume variance for the period to the nearest dollar? (E)
A. $2,548 F
C. $5,540 F
B. $2,992 U
D. $2,456 F
Questions 90 & 91 are based on the following information.
G & N 9e
An outdoor barbecue grill manufacturer has a standard costing system based on direct labor-hours (DLHs) as the
measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
3,300 DLHs
Fixed overhead cost
$26,895
The following data pertain to operations for the most recent period:
Actual hours
3,400 DLHs
Standard hours allowed for the actual output
3,420 DLHs
Actual total fixed overhead cost
$28,295
90. What was the fixed overhead budget variance for the period to the nearest dollar? (E)
a. $166 U
c. $585 F
b. $422 F
d. $1,400 U
91. What was the fixed overhead volume variance for the period to the nearest dollar? (E)
a. $978 F
c. $163 F
b. $993 F
d. $815 F
Questions 92 & 93 are based on the following information.
G & N 9e
An outdoor barbecue grill manufacturer has a standard costing system based on machine-hours (MHs) as the measure
of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
4,600 MHs
Fixed overhead cost
$50,140
The following data pertain to operations for the most recent period:
Actual hours
5,000 MHs
Standard hours allowed for the actual output
4,743 MHs
Actual total fixed overhead cost
$48,690
92. What was the fixed overhead budget variance for the period to the nearest dollar? (E)
a. $5,810 U
c. $1,450 F
b. $2,503 F
d. $3,009 U
93. What was the fixed overhead volume variance for the period to the nearest dollar? (E)
a. $2,801 U
c. $1,468 F
b. $1,559 F
d. $4,360 F
Questions xx thru xx are based on the following information.
H&M
Sacto Co.’s standard fixed overhead cost is $3 per direct labor hour based on budgeted fixed costs of $300,000. The
standard allows 2 direct labor hours per unit. During 1995,Sacto produced 55,000 units of product, incurred $315,000 of
fixed overhead costs, and recorded 106,000 actual hours of direct labor.
. What is Sacto’s fixed overhead spending variance for 1995? (E)
a. $30,000 (F)
d. $15,000 (U)
b. $12,000 (F)
e. $15,000 (F)
c. $18,000 (U)
156
. What is the standard activity level on which Sacto based its fixed overhead rate? (E)
157
a. 110,000 direct labor hours
b. 105,000 direct labor hours
c. 100,000 direct labor hours
d. 50,000 direct labor hours
e. 106,000 direct labor hours
. What is Sacto’s fixed overhead volume variance for 1995? (E)
a. $30,000 (F)
d. $30,000 (U)
b. $12,000 (F)
e. $15,000 (F)
c. $18,000 (U)
158
Budgeted Fixed Overhead
159
. If actual fixed manufacturing overhead was $108,000 and there was a $2,600 unfavorable spending variance and a
$2,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been (E)
a. $112,600
c. $106,000
b. $110,600
d. $105,400
Applied Fixed Overhead
160
. Fixed manufacturing overhead was budgeted at $400,000, and 25,000 direct labor hours were budgeted. If the fixed
overhead volume variance was $16,000 favorable and the fixed overhead spending variance was $12,000
unfavorable, fixed manufacturing overhead applied must be (E)
a. $416,000
d. $388,000
b. $412,000
e. $384,000.
c. $404,000
. Fixed manufacturing overhead was budgeted at $210,000, and 25,000 direct labor hours were budgeted. If the fixed
overhead volume variance was $8,000 unfavorable and the fixed overhead spending variance was $3,000
favorable, fixed manufacturing overhead applied must be (E)
a. $218,000
d. $205,000
b. $213,000
e. $202,000
c. $207,000
161
Comprehensive
Questions 80-81 are based on the following information:
G & N 10e
The Cloward Company uses a standard cost system in which manufacturing overhead is applied to units of product on
the basis of direct labor-hours (DLHs). During August, the company actually used 6,100 direct labor-hours and produced
2,500 units of product. The standard cost card for one unit of product includes the following data for manufacturing
overhead:
Variable overhead:
2.5 DLHs @ $3.00 per DLH.
Fixed overhead:
2.5 DLHs @ $2.50 per DLH.
For August, the company incurred $16,150 of fixed overhead costs and recorded a $625 favorable volume variance.
80. The denominator level of activity used by Cloward in setting the predetermined overhead rate for August is: (E)
A. 6,750 DLHs.
C. 6,250 DLHs.
B. 6,000 DLHs.
D. 6,500 DLHs.
81. The amount of fixed overhead cost contained in the company's budget for August is: (E)
A. $16,775.
C. $15,525.
B. $16,250.
D. $15,000.
Questions 82-83 are based on the following information:
G & N 10e
The Hawkins Company uses a standard costing system in which manufacturing overhead is applied to units of product
on the basis of direct labor-hours (DLHs). During February, the company actually used 9,200 direct labor-hours and
made 2,900 units of finished product. The standard cost card for one unit of product includes the following:
Variable overhead:
3 DLHs @ $4.75 per DLH
Fixed overhead:
3 DLHs @ $3.00 per DLH
For February, the company incurred $28,450 in fixed overhead costs and recorded a $900 favorable volume variance.
82. The amount of fixed overhead cost contained in the company's budget for February is:
A. $27,000.
C. $25,200.
B. $27,550.
D. $29,350.
83. The denominator activity level in direct labor-hours used by Hawkins in setting the predetermined overhead rate for
February is:
A. 9,300 hours.
C. 9,000 hours.
B. 8,400 hours.
D. 8,700 hours.
Questions 71-73 are based on the following information:
G & N 10e
Able Control Company, which manufactures electrical switches, uses a standard cost system in which manufacturing
overhead costs are applied to units of product on the basis of direct labor-hours (DLHs). The standard overhead costs
are shown below:
Variable overhead (5 DLHs @ $8.00 per DLH)
$40
Fixed overhead (5 DLHs @ $12.00* per DLH)
$60
*Based on 300,000 DLHs per month.
The following information is available for the month of October:
 Plans had called for the production of 60,000 switches.
 56,000 switches were actually produced.
 275,000 direct labor-hours were worked at a total cost of $2,550,000.
 Actual variable overhead costs were $2,340,000.
 Actual fixed overhead costs were $3,750,000.
71. The fixed overhead spending variance for October was: (E)
A. $48,000 Unfavorable.
C. $300,000 Favorable.
B. $150,000 Unfavorable.
D. $390,000 Unfavorable.
72. The variable overhead spending variance for October was: (E)
A. $60,000 Favorable.
C. $100,000 Unfavorable.
B. $110,000 Unfavorable.
D. $140,000 Unfavorable.
73. The variable overhead efficiency variance for October was: (E)
A. $40,000 Favorable.
C. $160,000 Unfavorable.
B. $60,000 Favorable.
D. $210,000 Unfavorable.
Questions 89-91 are based on the following information:
G & N 10e
The Stephens Company uses a standard cost system in which manufacturing overhead is applied to units of product on
the basis of direct labor-hours (DLHs). The company has the following flexible budget (in condensed form) for
manufacturing overhead:
Direct labor-hours (DLH)
15,000
30,000
Total variable overhead costs
$17,250
$34,500
Total fixed overhead costs
$45,000
$45,000
The following data concerning production pertain to last year's operations:
 The company used a denominator activity of 22,500 direct labor hours to compute the predetermined overhead
rate.
 The company made 10,275 units of product and worked 21,300 actual hours during the year.

Actual variable overhead was $23,856 and actual fixed overhead was $46,275 for the year.
 The standard direct labor time is 2 hours per unit of product.
89. The fixed overhead cost applied during the year was: (E)
A. $20,550.
C. $45,000.
B. $41,100.
D. $46,275.
90. The fixed overhead budget variance was: (E)
A. $2,550 U.
C. $1,275 U.
B. $5,175 U.
D. $5,175 F.
91. The volume variance was: (E)
A. $7,800 U.
B. $1,500 F.
C. $1,200 F.
D. $3,900 U.
Questions 92-95 are based on the following information:
G & N 10e
A furniture manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data
from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
1,400 MHs
Overhead costs at the denominator activity level:
Variable overhead cost
$12,040
Fixed overhead cost
$17,360
The following data pertain to operations for the most recent period:
Actual hours
Standard hours allowed for the actual output
Actual total variable overhead cost
Actual total fixed overhead cost
1,300 MHs
1,440 MHs
$11,440
$18,560
92. What is the predetermined overhead rate to the nearest cent? (E)
A. $21.00
C. $23.08
B. $21.43
D. $22.62
93. How much overhead was applied to products during the period to the nearest dollar? (E)
A. $30,000
C. $27,300
B. $30,240
D. $29,400
94. What was the fixed overhead budget variance for the period to the nearest dollar? (E)
A. $2,440 F
C. $1,999 U
B. $1,200 U
D. $704 F
95. What was the fixed overhead volume variance for the period to the nearest dollar? (E)
A. $1,240 U
C. $1,736 F
B. $496 F
D. $516 F
Questions 96-99 are based on the following information:
G & N 10e
A manufacturer of playground equipment has a standard costing system based on direct labor-hours (DLHs) as the
measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
5,800 DLHs
Fixed overhead cost
$58,870
The following data pertain to operations for the most recent period:
Actual hours
Standard hours allowed for the actual output
Actual total fixed overhead cost
6,100 DLHs
6,018 DLHs
$58,320
96. What is the predetermined fixed overhead rate to the nearest cent? (E)
A. $10.15
C. $9.65
B. $9.56
D. $10.06
97. How much fixed overhead was applied to products during the period to the nearest dollar? (E)
A. $58,870
C. $61,915
B. $61,083
D. $58,320
98. What was the fixed overhead budget variance for the period to the nearest dollar? (E)
A. $3,595 U
C. $2,763 U
B. $550 F
D. $784 F
99. What was the fixed overhead volume variance for the period to the nearest dollar? (E)
A. $2,213 F
C. $3,045 F
B. $2,113 F
D. $832 U
Comprehensive
Variable Overhead Spending Variance & Volume Variance
Questions 69 & 70 are based on the following information.
AICPA, Adapted
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 to operations during March:
Units actually produced
Actual direct labor hours worked
Actual manufacturing overhead incurred:
Variable overhead
Fixed overhead
38,000
80,000
$250,000
$384,000
69. For March, the variable overhead spending variance was: (E)
a. $6,000 F.
c. $12,000 U.
b. $10,000 U.
d. $22,000 F.
70. For March, the fixed overhead volume variance was: (E)
a. $96,000 U.
c. $80,000 U.
b. $96,000 F.
d. $80,000 F.
Questions 81 thru 85 are based on the following information.
Pol Bobadilla
The following data are the actual results for Roadtrek Co. for October:
Actual output
9,000 cases
Actual variable overhead
P405,000
Actual fixed overhead
P122,000
Actual machine time
40,500 machine hours
Standard cost and budget information for Roadtrek Company follows:
Standard variable overhead rate
P9.00 per MH
Standard quantity of machine hours
4 hours per case
Budgeted fixed overhead
P1,440,000 per year
Budgeted output
10,000 cases per month
81. The variable overhead spending variance for the month of October is (E)
A. P40,500 U
C. P45,000 U
B. P81,000 U
D. P81,000 F
82. The overhead efficiency variance is (E)
A. P4,500 U
B. P40,500 U
C. P4,500 F
D. P40,500 F
83. The amount of fixed overhead controllable variance is (E)
A. P2,000 U
C. P42,500 U
B. P2,000 F
D. P42,500 F
84. The amount of fixed overhead volume variance is (E)
A. P12,000 F
C. P21,000 F
B. P12,000 U
D. P21,000 U
85. The amount of variable overhead volume variance is (E)
A. Zero.
C. P12,000 F
B. P9,000 U
D. P2,250 U
Questions 59-62 are based on the following information:
G & N 10e
The Phelps Company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are
applied to products on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are
required per unit of product. Phelps Company had the following budgeted and actual data for March:
Actual
Budgeted
Units produced
22,000
20,000
Direct labor-hours
105,000
100,000*
Variable overhead costs
$91,000
$80,000
Fixed overhead costs
$52,000
$50,000
*Represents the denominator activity for the month.
59. The variable overhead spending variance for March is: (E)
A. $ 7,000 unfavorable.
C. $13,000 unfavorable.
B. $ 9,000 unfavorable.
D. $11,000 unfavorable.
60. The variable overhead efficiency variance for March is: (E)
A. $8,000 unfavorable.
C. $8,000 unfavorable.
B. $4,000 favorable.
D. $4,000 unfavorable.
61. The fixed overhead budget variance for March is: (E)
A. $2,000 favorable.
C. $2,000 unfavorable.
B. $ 500 favorable.
D. $2,500 favorable.
62. The fixed overhead volume variance for March is:(E)
A. $1,000 favorable.
C. $2,500 unfavorable.
B. $5,000 favorable.
D. $5,000 unfavorable.
Questions 63-66 are based on the following information:
G & N 10e
Derf Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct laborhours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units.
Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours
worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was
$108,500 and fixed manufacturing overhead cost was $28,000.
63. The variable overhead spending variance for the period was: (E)
A. $5,300 unfavorable.
C. $6,300 unfavorable.
B. $1,200 unfavorable.
D. $6,500 unfavorable.
64. The variable overhead efficiency variance for the period was: (E)
A. $5,300 unfavorable.
C. $1,500 unfavorable.
B. $1,200 unfavorable.
D. $6,500 unfavorable.
65. The fixed overhead budget variance for the period was: (E)
A. $6,300 unfavorable.
C. $1,500 unfavorable.
B. $2,500 unfavorable.
D. $1,000 unfavorable.
66. The fixed overhead volume variance for the period was: (E)
A. $750 unfavorable.
C. $1,500 unfavorable.
B. $2,500 unfavorable.
D. $1,000 unfavorable.
Questions 67-70 are based on the following information:
G & N 10e
The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing
overhead costs are applied to units of product on the basis of direct labor-hours. The standard cost card shows that 5
direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for
the year:
Actual
Budgeted
Units produced
33,000
30,000
Direct labor-hours
157,500
150,000*
Variable overhead costs
$136,500
$120,000
Fixed overhead costs
$ 78,000
$ 75,000
*Represents the denominator activity.
67. The variable overhead spending variance was: (E)
A. $4,500 U.
C. $13,500 U.
B. $10,500 U.
D. $16,500 U.
68. The variable overhead efficiency variance was: (E)
A. $6,000 U.
C. $12,000 U.
B. $6,000 F.
D. $12,000 F.
69. The fixed overhead budget variance was: (E)
A. $750 F.
C. $7,500 F.
B. $3,750 F.
D. $3,000 U.
70. The fixed overhead volume variance for was: (E)
A. $7,500 F.
C. $3,750 U.
B. $1,500 F.
D. $7,500 U.
Questions 61 thru 64 are based on the following information.
Horngren
Roberts Corporation manufactured 100,000 buckets during February. The overhead cost-allocation base is $5.00 per
machine-hour. The following variable overhead data pertain to February.
Actual
Budgeted
Production
100,000 units
100,000 units
Machine-hours
9,800 hours
10,000 hours
Variable overhead cost per machine-hour
$5.25
$5.00
162
. What is the actual variable overhead cost? (E)
a. $49,000
c. $51,450
b. $50,000
163
. What is the flexible-budget amount? (E)
a. $49,000
b. $50,000
d. none of the above
c. $51,450
d. none of the above
164
. What is the variable overhead spending variance?
a. $1,000 favorable
c. $2,450 unfavorable
b. $1,450 unfavorable
d. none of the above
165
. What is the variable overhead efficiency variance? (E)
a. $1,000 favorable
c. $2,450 unfavorable
b. $1,450 unfavorable
d. none of the above
Questions 65 thru 68 are based on the following information.
Horngren
Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation base is $11.25
per machine-hour. The following variable overhead data pertain to September.
Actual
Budgeted
Production
30,000 units
24,000 units
Machine-hours
15,000 hours
10,800 hours
Variable overhead cost per machine-hour:
$11.00
$11.25
166
. What is the actual variable overhead cost? (E)
a. $121,500
c. $165,000
b. $151,875
d. $168,750
167
. What is the flexible-budget amount? (E)
a. $121,500
b. $151,875
c. $165,000
d. $168,750
168
. What is the variable overhead spending variance? (E)
a. $3,750 favorable
c. $13,125 unfavorable
b. $16,875 unfavorable
d. $30,375 unfavorable
169
. What is the variable overhead efficiency variance? (E)
a. $3,750 favorable
c. $13,125 unfavorable
b. $16,875 unfavorable
d. $30,375 unfavorable
Questions 44 thru 47 are based on the following information.
Horngren
Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable
manufacturing overhead. The following information pertains to the company's manufacturing overhead data.
Budgeted output units
15,000 units
Budgeted machine-hours
5,000 hours
Budgeted variable manufacturing overhead costs for 15,000 units
$161,250
Actual output units produced
22,000 units
Actual machine-hours used
7,200 hours
Actual variable manufacturing overhead costs
$242,000
170
. What is the budgeted variable overhead cost rate per output unit? (E)
a. $10.75
c. $32.25
b. $11.00
d. $48.40
171
. What is the flexible-budget amount for variable manufacturing overhead? (E)
a. $165,000
c. $242,000
b. $236,500
172
d. none of the above
. What is the flexible-budget variance for variable manufacturing overhead? (E)
a. $5,500 favorable
c. $4,300 favorable
b. $5,500 unfavorable
d. none of the above
47. Variable manufacturing overhead costs were __________ for actual output. (E)
a. higher than expected
c. lower than expected
b. the same as expected
d. unable to be determined
Questions 48 thru 51 are based on the following information.
Horngren
White Corporation manufactures football jerseys and uses budgeted machine-hours to allocate variable manufacturing
overhead. The following information pertains to the company's manufacturing overhead data.
Budgeted
Actual
Output units
20,000
18,000
Machine-hours
30,000
28,000
Variable manufacturing overhead costs
$360,000
$342,000
173
. What is the budgeted variable overhead cost rate per output unit? (E)
a. $12.00
c. $18.00
b. $12.21
d. $19.00
174
. What is the flexible-budget amount for variable manufacturing overhead? (E)
a. $324,000
c. $380,000
b. $342, 000
d. none of the above
175
. What is the flexible-budget variance for variable manufacturing overhead? (E)
a. $18,000 favorable
c. zero
b. $18,000 unfavorable
d. none of the above
51. Variable-manufacturing overhead costs were __________ for actual output. (E)
a. higher than expected
c. lower than expected
b. the same as expected
d. unable to be determined
Questions 100 thru 102 are based on the following information.
G & N 9e
The Upton Company employs a standard costing system in which variable overhead is assigned to production on the
basis of direct labor hours. Data for the month of February include the following:

Variable manufacturing overhead cost incurred: $48,700

Total variable overhead variance: $300 F

Standard hours allowed for actual production: 7,000

Actual direct labor hours worked: 6,840
100.The standard variable overhead rate per direct labor hour is: (E)
a. $6.91.
c. $7.00.
b. $6.95.
d. $7.12.
101.The variable overhead spending variance is: (E)
a. $820 F.
c. $740 F.
b. $820 U.
d. $740 U.
102.The variable overhead efficiency variance is: (E)
a. $430 U.
c. $1,120 F.
b. $740 F.
d. $950 U.
Questions 81 thru 84 are based on the following information.
Horngren
Jenny’s Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation
rate is $20.00 per machine-hour. The following fixed overhead data pertain to March.
Actual
Static Budget
Production
25,000 units
24,000 units
Machine-hours
6,100 hours
6,000 hours
Fixed overhead costs for March
$123,000
$120,000
176
. What is the flexible-budget amount? (E)
a. $120,000
b. $122,000
c. $123,000
d. $125,000
177
. What is the amount of fixed overhead allocated to production? (E)
a. $120,000
c. $123,000
b. $122,000
d. $125,000
178
. What is the fixed overhead spending variance? (E)
a. $1,000 unfavorable
c. $3,000 unfavorable
b. $2,000 favorable
d. $5,000 favorable
179
. What is the fixed overhead production-volume variance? (E)
a. $1,000 unfavorable
c. $3,000 unfavorable
b. $2,000 favorable
d. $5,000 favorable
Questions 85 thru 88 are based on the following information.
Horngren
Matthew’s Corporation manufactured 10,000 golf bags during March. The fixed overhead cost-allocation rate is $20.00
per machine-hour. The following fixed overhead data pertain to March.
Actual
Static Budget
Production
10,000 units
12,000 units
Machine-hours
5,100 hours
6,000 hours
Fixed overhead cost for March
$122,000
$120,000
180
. What is the flexible-budget amount? (E)
a. $100,000
b. $102,000
c. $120,000
d. $122,000
181
. What is the amount of fixed overhead allocated to production? (E)
a. $100,000
c. $120,000
b. $102,000
d. $122,000
182
. What is the fixed overhead production-volume variance? (E)
a. $2,000 unfavorable
c. $20,000 unfavorable
b. $18,000 favorable
d. $22,000 unfavorable
183
. Fixed overhead is (E)
a. overallocated by $2,000.
b. underallocated by $2,000.
c. overallocated by $22,000.
d. underallocated by $22,000.
Questions 71 thru 74 are based on the following information.
G & N 9e
A furniture manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data
from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
3,300 MHs
Overhead costs at the denominator activity level:
Variable overhead cost
$31,845
Fixed overhead cost
The following data pertain to operations for the most recent period:
Actual hours
Standard hours allowed for the actual output
Actual total variable overhead cost
Actual total fixed overhead cost
$40,425
3,400 MHs
3,078 MHs
$32,980
$38,975
71. What is the predetermined overhead rate to the nearest cent? (E)
a. $21.90
c. $21.16
b. $21.80
d. $21.26
72. How much overhead was applied to products during the period to the nearest dollar? (E)
a. $74,460
c. $67,408
b. $72,270
d. $71,955
73. What was the fixed overhead budget variance for the period to the nearest dollar? (E)
a. $2,675 U
c. $3,691 F
b. $1,450 F
d. $1,270 F
74. What was the fixed overhead volume variance for the period to the nearest dollar? (E)
a. $2,720 U
c. $2,811 U
b. $1,225 F
d. $3,945 U
Questions 75 thru 78 are based on the following information.
G & N 9e
A manufacturer of playground equipment has a standard costing system based on machine-hours (MHs) as the measure
of activity. Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
3,000 MHs
Fixed overhead cost
$40,650
The following data pertain to operations for the most recent period:
Actual hours
Standard hours allowed for the actual output
Actual total fixed overhead cost
3,400 MHs
3,172 MHs
$41,600
75. What is the predetermined fixed overhead rate to the nearest cent? (E)
a. $12.24
c. $13.87
b. $13.55
d. $11.96
76. How much fixed overhead was applied to products during the period to the nearest dollar? (E)
a. $40,650
c. $41,600
b. $42,981
d. $46,070
77. What was the fixed overhead budget variance for the period to the nearest dollar? (E)
a. $4,470 U
c. $2,790 F
b. $950 U
d. $1,381 U
78. What was the fixed overhead volume variance for the period to the nearest dollar? (E)
a. $2,256 F
c. $3,089 U
b. $2,331 F
d. $5,420 F
Questions 84-88 are based on the following information:
G & N 10e
The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead:
Direct labor-hours (DLH)
10,000
20,000
Total variable overhead costs
$11,500
$23,000
Total fixed overhead costs
$30,000
$30,000
The following data concerning production pertain to last year's operations:
 The company used a denominator activity of 15,000 direct labor-hours to compute the predetermined overhead
rate.
 The company made 6,850 units of product and worked 14,200 actual hours during the year.

Actual variable overhead was $15,904 and actual fixed overhead was $30,850 for the year.
 The standard direct labor time is two hours per unit of product.
84. The variable element of the predetermined overhead rate was (per DLH): (E)
A. $4.15.
C. $2.00.
B. $3.00.
D. $1.15.
85. The fixed element of the predetermined overhead rate was (per DLH): (E)
A. $4.15.
C. $2.00.
B. $3.00.
D. $1.15.
86. The fixed overhead cost applied to work in process was: (E)
A. $27,400.
C. $30,850.
B. $30,000.
D. $13,700.
87. The fixed overhead budget variance was: (E)
A. $3,450 unfavorable.
C. $850 unfavorable.
B. $3,450 favorable.
D. $1,200 favorable.
88. The volume variance was: (E)
A. $2,000 favorable.
B. $2,600 unfavorable.
C. $1,000 favorable.
D. $800 favorable.
Questions 42-47 are based on the following information:
G & N 10e
Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the
basis of direct labor-hours. Each unit requires two standard hours of labor for completion. The denominator activity for
the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year,
and the fixed overhead rate was $3.00 per unit. The actual data pertaining to the manufacturing overhead for the year
are presented below:
Actual production
Actual direct labor-hours
Actual variable overhead
Actual fixed overhead
198,000 Units
440,000 direct labor-hours
$352,000
$575,000
42. The standard hours allowed for actual production for the year total: (E)
A. 247,500.
C. 400,000.
B. 396,000.
D. 495,000.
43. Franklin's variable overhead efficiency variance for the year is: (M)
A. $33,000 unfavorable.
C. $35,200 unfavorable.
B. $35,200 favorable.
D. $33,000 favorable.
44. Franklin's variable overhead spending variance for the year is: (M)
A. $20,000 unfavorable.
C. $22,000 unfavorable.
B. $22,000 favorable.
D. $20,000 favorable.
45. Franklin's fixed overhead budget variance for the year is: (M)
A. $19,000 favorable.
C. $25,000 unfavorable.
B. $25,000 favorable.
D. $19,000 unfavorable.
46. The fixed overhead applied to Franklin's production for the year is: (M)
A. $484,200.
C. $594,000.
B. $575,000.
D. $600,000.
47. Franklin's fixed overhead volume variance for the year is: (M)
A. $6,000 unfavorable.
C. $25,000 favorable.
B. $19,000 favorable.
D. $55,000 unfavorable.
Questions 48-53 are based on the following information:
G & N 10e
A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity.
Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
3,700 DLHs
Overhead costs at the denominator activity level:
Variable overhead cost
$28,490
Fixed overhead cost
$47,545
The following data pertain to operations for the most recent period:
Actual hours
Standard hours allowed for the actual output
Actual total variable overhead cost
Actual total fixed overhead cost
3,900 DLHs
3,850 DLHs
$29,445
$47,995
48. What is the predetermined overhead rate to the nearest cent? (E)
A. $20.93
C. $19.50
B. $19.86
D. $20.55
49. How much overhead was applied to products during the period to the nearest dollar? (E)
A. $79,118
C. $77,440
B. $76,035
D. $80,145
50. What was the variable overhead spending variance for the period to the nearest dollar? (E)
A. $585 U
C. $955 U
B. $585 F
D. $955 F
51. What was the variable overhead efficiency variance for the period to the nearest dollar? (E)
A. $578 U
C. $378 U
B. $385 U
D. $955 U
52. What was the fixed overhead budget variance for the period to the nearest dollar? (E)
A. $615 F
C. $1,478 U
B. $2,120 U
D. $450 U
53. What was the fixed overhead volume variance for the period to the nearest dollar? (E)
A. $1,870 F
C. $643 U
B. $1,928 F
D. $2,570 F
Questions 54-58 are based on the following information:
G & N 10e
The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on a
basis of machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following
total budgeted costs at the denominator activity level of 40,000 machine-hours:
Variable overhead costs (total):
Maintenance
$36,000
Utilities
$20,000
Fixed overhead costs (total):
Supervision
$24,000
Depreciation
$16,00
During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual
overhead costs:
Variable overhead costs (total):
Maintenance
$43,420
Utilities
$32,510
Fixed overhead costs (total):
Supervision
$26,970
Depreciation
$16,000
The standard time allowed to complete one unit of product is 3.6 machine-hours.
54. The total predetermined overhead rate per machine-hour for November was: (E)
A. $1.75.
C. $2.97.
B. $2.40.
D. $1.40.
55. The total amount of overhead cost applied to Work in Process during November was: (E)
A. $ 47,520.
C. $106,528.
B. $ 66,528.
D. $114,048.
56. The variable overhead efficiency variance for utilities cost for November was: (?)
A. $2,760 favorable.
C. $3,760 favorable.
B. $3,760 unfavorable.
D. $1,000 favorable.
57. The variable overhead spending variance for maintenance cost for November was: (?)
A. $7,420 unfavorable.
C. $9,820 unfavorable.
B. $2,400 favorable.
D. $5,620 unfavorable.
58. The fixed overhead budget variance for November was: (E)
A. $ 2,970 unfavorable.
C. $ 7,520 favorable.
B. $ 4,550 favorable.
D. $22,900 unfavorable.
Comprehensive
Questions xx thru xx are based on the following information.
H&M
Smith Corporation uses a standard cost system. Information for the month of April is as follows:
Actual manufacturing overhead costs (13,000 is fixed)
$40,000
Direct labor:
Actual hours worked
12,000 hrs.
Standard hours allowed
10,000 hrs.
Average actual labor cost per hour
$9
Standard cost data at 12,000 direct labor hours was:
Variable factory overhead
$24,000
Fixed factory overhead
12,000
Total factory overhead
$36,000
The factory overhead rate is based on a normal volume of 12,000 direct labor hours.
184
. What is the variable overhead efficiency variance for Smith? (E)
a. $1,000 (U)
d. $10,000 (U)
b. $4,000 (U)
e. $3,000 (U)
c. $2,000 (U)
185
. What is the fixed overhead spending variance for Smith? (E)
a. $1,000 (U)
d. $10,000 (U)
b. $4,000 (U)
e. $3,000 (U)
c. $2,000 (U)
Questions xx thru xx are based on the following information.
H&M
Ritz Production Company has the following information:
Standard factory overhead rates are based on a normal monthly volume of 10,000 units (1 standard direct hour per unit).
Standard factory overhead
rates per direct labor hour
are:
Fixed
$3.00
Variable
5.00
$8.00
Units actually produced in current month
9,000 units
Actual factory overhead costs incurred (includes $35,000 fixed)
Actual direct labor hours
$78,000
9,000 hours
. What is the fixed overhead spending variance for Ritz? (E)
a. $3,000 (U)
d. $5,000 (F)
b. $0
e. $5,000 (U)
c. $2,000 (F)
186
. What is the fixed overhead volume variance for Ritz? (E)
a. $3,000(U)
d. $5,000(F)
b. $0
e. $5,000(U)
c. $2,000(F)
187
. What is the variable overhead spending variance for Ritz? (E)
a. $43,000 (U)
d. $5,000 (F)
b. $0
e. $5,000 (U)
c. $2,000 (F)
188
Questions 92 through 95 are based on the following information.
Barfield
Standard Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows:
Standard costs per unit:
Variable portion
2 hours @ $3 = $ 6
Fixed portion
2 hours @ $5 =
10
$16
During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following
data relate to April:
 Actual machine hours used were 165,000.
 Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed).
 All inventories are carried at standard cost.
92. The variable overhead spending variance for April was (E)
a. $15,000 U.
c. $38,000 F.
b. $23,000 U.
d. $38,000 U.
93. The variable overhead efficiency variance for April was (E)
a. $15,000 U.
c. $38,000 F.
b. $23,000 U.
d. $38,000 U.
94. The fixed overhead spending variance for April was (E)
a. $40,000 U.
c. $60,000 F.
b. $40,000 F.
d. $60,000 U.
95. The fixed overhead volume variance for April was (E)
a. $60,000 U.
c. $100,000 F.
b. $60,000 F.
d. $100,000 U.
Questions 47 thru 52 are based on the following information.
G & N 9e
A manufacturing company has a standard costing system based on machine-hours (MHs) as the measure of activity.
Data from the company's flexible budget for manufacturing overhead are given below:
Denominator level of activity
6,100 MHs
Overhead costs at the denominator activity level:
Variable overhead cost
$35,075
Fixed overhead cost
$77,775
The following data pertain to operations for the most recent period:
Actual hours
Standard hours allowed for the actual output
Actual total variable overhead cost
Actual total fixed overhead cost
6,300 MHs
5,994 MHs
$36,540
$76,875
47. What is the predetermined overhead rate to the nearest cent? (E)
a. $17.91
c. $18.00
b. $18.59
d. $18.50
48. How much overhead was applied to products during the period to the nearest dollar? (E)
a. $112,850
c. $116,550
b. $113,415
d. $110,889
49. What was the variable overhead spending variance for the period to the nearest dollar? (E)
a. $315 U
c. $1,465 U
b. $1,465 F
d. $315 F
50. What was the variable overhead efficiency variance for the period to the nearest dollar? (E)
a. $300 F
c. $1,760 U
b. $1,465 U
d. $1,775 U
51. What was the fixed overhead budget variance for the period to the nearest dollar? (E)
a. $900 F
c. $3,734 F
b. $452 F
d. $3,450 U
52. What was the fixed overhead volume variance for the period to the nearest dollar? (E)
a. $1,359 U
c. $3,902 U
b. $2,550 F
d. $1,352 U
Questions 53 thru 56 are based on the following information.
G & N 9e
The Dillon Company makes and sells a single product and uses a flexible budget for overhead to plan and control
overhead costs. Overhead costs are applied on the basis of direct labor-hours. The standard cost card shows that 5
direct labor-hours are required per unit. The Dillon Company had the following budgeted and actual data for March:
Actual
Budgeted
Units produced
33,900
30,800
Direct labor-hours
161,800
154,000
Variable overhead costs
$140,500
$123,200
Fixed overhead costs
$80,000
$77,000
53. The variable overhead spending variance for March is: (E)
a. $4,900 U.
c. $14,700 U.
b. $11,060 U.
d. $17,300 U.
54. The variable overhead efficiency variance for March is: (E)
a. $12,400 F.
c. $12,400 U.
b. $6,160 U.
d. $6,160 F.
55. The fixed overhead budget variance for March is: (E)
a. $900 F.
c. $3,000 U.
b. $3,900 F.
d. $7,750 F.
56. The fixed overhead volume variance for March is: (E)
a. $7,750 F.
c. $1,550 F
b. $7,750 U.
d. $3,900 U.
Questions 57 thru 60 are based on the following information.
G & N 9e
The Ferris Company applies manufacturing overhead costs to products on the basis of direct labor hours. The standard
cost card shows that 3 direct labor hours are required per unit of product. For August, the company budgeted to work
90,000 direct labor hours and to incur the following total manufacturing overhead costs:
Total variable overhead costs
$ 99,000
Total fixed overhead costs
$118,800
During August, the company completed 28,000 units of product, worked 86,000 direct labor hours, and incurred the
following total manufacturing overhead costs:
Total variable overhead costs
$ 98,900
Total fixed overhead costs
$115,300
The denominator activity in the predetermined overhead rate is 90,000 direct labor hours.
57. For August, the variable overhead spending variance is: (E)
a. $4,300 F.
c. $6,500 F.
b. $4,300 U.
d. $6,500 U.
58. For August, the variable overhead efficiency variance is: (E)
a. $1,800 F.
c. $2,200 U.
b. $0.
d. $2,200 F.
59. For August, the fixed overhead budget variance is: (E)
a. $3,500 F.
c. $3,200 F.
b. $3,500 U.
d. $3,200 U.
60. For August, the fixed overhead volume variance is: (E)
a. $4,300 U.
c. $4,980 F.
b. $7,920 U.
d. $4,980 U.
Questions 61 thru 64 are based on the following information.
AICPA, Adapted
King Company estimated that it would operate its manufacturing facilities at 800,000 direct labor hours for the year and
this served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead
for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead
rate was $2 per direct labor hour. The standard direct labor time was 3 direct labor hours per unit. The actual results for
the year are presented below:
Actual finished units
250,000
Actual direct labor hours
764,000
Actual variable overhead
$1,610,000
Actual fixed overhead
$ 392,000
61. The variable overhead spending variance for the year is: (E)
a. $2,000 F.
c. $82,000 U.
b. $10,000 U.
d. $110,000 U.
62. The variable overhead efficiency variance for the year is: (E)
a. $28,000 U.
c. $100,000 F.
b. $100,000 U.
d. $28,000 F.
63. The fixed overhead spending variance for the year is: (E)
a. $8,000 F.
c. $17,000 U.
b. $10,000 U.
d. $74,000 F.
64. The fixed overhead volume variance for the year is: (E)
a. $7,000 U.
c. $41,667 U.
b. $25,000 U.
d. $18,000 F.
Questions 111 through 115 are based on the following information.
CMA 1292 3-15 to 19
Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are
planned manufacturing data for 1992 and actual data for November 1992. The company applies overhead based on
planned machine hours using a predetermined annual rate.
1992 Planning Data
Annual
November
Fixed manufacturing overhead
$1,200,000
$100,000
Variable manufacturing overhead
2,400,000
220,000
Direct labor hours
48,000
4,000
Machine hours
240,000
22,000
Direct labor hours
Machine hours
Fixed manufacturing overhead
Variable manufacturing overhead
November 1992 Data
Actual
4,200
21,600
$101,200
$214,000
Planned*
4,000
21,000
* plan based on output
189
. The predetermined overhead application rate for Nanjones Company for 1992 is (D)
a. $5.00
c. $10.00
b. $25.00
d. $15.00
190
. The total amount of overhead applied to production for November 1992 was (D)
a. $316,200.
c. $320,000.
b. $315,000.
d. $300,000.
191
. The amount of over- or under-applied variable manufacturing overhead for November was (D)
a. $6,000 over-applied.
c. $20,000 over-applied.
b. $4,000 under-applied.
d. $6,000 under-applied.
192
. The variable overhead spending variance for November 1992 was (D)
a. $2,000 favorable.
c. $14,000 unfavorable.
b. $6,000 favorable.
d. $6,000 unfavorable.
193
. The fixed overhead volume variance for November 1992 was (D)
a. $1,200 unfavorable.
c. $10,000 favorable.
b. $5,000 unfavorable.
d. $5,000 favorable.
Questions 116 through 121 are based on the following information.
CMA 1290 3-5 to 10
Franklin Glass Works' production budget for the year ended November 30 was based on 200,000 units. Each unit
requires two standard hours of labor for completion. Total overhead was budgeted at $900,000 for the year, and the fixed
overhead rate was estimated to be $3.00 per unit. Both fixed and variable overhead are assigned to the product on the
basis of direct labor hours. The actual data for the year ended November 30 are presented as follows.
Actual production in units
198,000
Actual direct labor hours
440,000
Actual variable overhead
$352,000
Actual fixed overhead
$575,000
194
. The standard hours allowed for actual production for the year ended November 30 total (M)
A. 247,500.
C. 400,000.
B. 396,000.
D. 495,000.
195
. Franklin's variable overhead efficiency variance for the year is (M)
A. $33,000 unfavorable.
C. $66,000 unfavorable.
B. $35,520 favorable.
D. $33,000 favorable.
196
. Franklin's variable overhead spending variance for the year is (M)
A. $20,000 unfavorable.
C. $22,000 unfavorable.
B. $19,800 favorable.
D. $20,000 favorable.
197
. Franklin's fixed overhead spending variance for the year is (E)
A. $19,000 favorable.
C. $5,750 favorable.
B. $25,000 favorable.
D. $25,000 unfavorable.
198
. The fixed overhead applied to Franklin's production for the year is (M)
A. $484,200.
C. $594,000.
B. $575,000.
D. $600,000.
199
. Franklin's fixed overhead volume variance for the year is (M)
A. $6,000 unfavorable.
C. $25,000 favorable.
B. $19,000 favorable.
D. $55,000 unfavorable.
DISPOSITION OF VARIANCES
Allocation Method
Underapplied Charged to Cost of Goods Sold
200
. Kell Company has the following selected debit balance accounts at the end of the current year: Work-in-Process,
$100,000; Finished Goods Inventory, $50,000; Cost of Goods Sold, $150,000; and Factory Overhead, $24,000. If
over- or underapplied factory overhead is disposed of by the allocation method, the amount charged to Cost of
Goods Sold will be (E)
a. $6,000
d. $24,000
b. $12,000
e. $4,000
c. $8,000
H&M
Adjusted Cost of Goods Sold
201
. Account balances are as follows:
Manufacturing overhead
Work in process inventory
Finished goods inventory
Cost of goods sold
$120,000 underapplied
50,000
150,000
400,000
If underapplied or overapplied overhead is material and is allocated to Work in Process Inventory, Finished Goods
Inventory, and Cost of Goods Sold (based on ending account balances), Cost of Goods Sold after adjustment would
have a balance of (E)
a. $720,000
c. $520,000
b. $680,000
d. $480,000
H&M
. Worley Company has underapplied overhead of $45,000 for the year ended December 31, 2002. Before disposition
of the underapplied overhead, selected December 31, 2002 balances from Worley’s accounting recorded are as
follows:
Sales
$1,200,000
Cost of goods sold
720,000
Inventories:
Direct materials
36,000
Work in process
54,000
Finished goods
90,000
Under Worley’s cost accounting system, over- or underapplied overhead is allocated to appropriate inventories and
cost of goods sold based on year-end balances. In its 2002 income statement, Worley should report cost of goods
sold of (M)
A. $682,500
C. $756,000
B. $684,000
D. $757,500
202
Charged to Finished Goods, DM & DL Component of FG Inventory
Questions 1 thru 4 are based on the following information.
AICPA adapted
Josey Manufacturing Corporation uses a standard cost system that records direct materials at actual cost, records
materials price variances at the time that direct materials are issued to work in process, and prorates all variances at
year end. Variances associated with direct materials are prorated based on the direct materials balances in the
appropriate accounts, and variances associated with direct labor and factory overhead are prorated based on the direct
labor balances in the appropriate accounts.
The following information is available for Josey for the year ended December 31:
Finished goods inventory at December 31:
Direct materials
$ 87,000
Direct labor
130,500
Applied factory overhead
104,400
Direct materials inventory at December 31
65,000
Cost of goods sold for the year ended December 31:
Direct materials
348,000
Direct labor
739,500
Applied factory overhead
591,600
Direct materials price variance (unfavorable)
12,500
Direct materials usage variance (favorable)
15,000
Direct labor rate variance (unfavorable)
20,000
Direct labor efficiency variance (favorable)
5,000
Factory overhead incurred
690,000
There were no beginning inventories and no ending work in process inventory. Factory overhead is applied at 80% of
standard direct labor cost.
*. The amount of direct materials price variance to be prorated to finished goods inventory at December 31 is a:
A. $1,740 debit
B. $2,500 debit ($2,175)
C. $2,610 credit
D. $3,000 credit
*. The total amount of direct materials in finished goods inventory at December 31, after all materials variances have
been prorated, is:
A. $86,500 ($85,565)
B. $87,500
C. $88,000
D. $86,000
*. The total amount of direct labor in finished goods inventory at December 31, after all variances have been prorated,
is: (D)
A. $126,750
B. $134,250
C. $132,750
D. $133,750
*. The total cost of goods sold for the year ended December 31, after all variances have been prorated, is:
A. $1,693,850
B. $1,684,750 ($1,108,200)
C. $1,675,450
D. $1,683,270
GROSS PROFIT
. Alma Company budgeted that factory overhead for 2003 and 2004 would be P60,000 for each year. The predicted
and actual activity for 2003 and 2004 were 30,000 and 20,000 direct labor hours, respectively.
2003
2004
Sales in units
25,000
25,000
Selling price per unit
P10
P10
Direct materials and direct labor cost per unit
P5
P5
.
The company assumes that the long-run production level is 20,000 direct labor hours per year. The actual factory
overhead cost for the end of 2003 and 2004 was P60,000. Assume that it takes one direct labor hour to make one
finished unit.
When the annual estimated factory overhead rate is used, the gross profits for 2003 and 2004, respectively, are (D)
A. P75,000 and P75,000
C. P75,000 and P55,000
B. P125,000 and P125,000
D. P75,000 and P50,000
Pol Bobadilla
JOURNAL ENTRIES
Material & Labor Components of Inventories
Questions 1 & 2 are based on the following information.
CMA adapted
Sam Company adopted a standard cost system several years ago. The standard costs for the prime costs of its single
product are as follows:
Material (8 kilograms x $5.00/kg.)
$40.00
Labor (6 hours x $8.20/hr.)
$49.20
The operating data in the following column were taken from the records for November:
In-process beginning inventory
none
In-process ending inventory (75% complete as to labor;
material is issued at the beginning of processing)
800 units
Units completed
5,600 units
Budgeted output
6,000 units
Purchases of materials
50,000 kilograms
Total actual labor costs
$300,760
Actual hours of labor
36,500 hours
Material usage variance
$1,500 unfavorable
Total material variance
$750 unfavorable
203
. The total amount of material and labor cost transferred to the finished goods account for November is:
A. $499,520
B. $535,200
204
$9,840
C. $550,010
D. $561,040
. The total amount of material and labor cost in the ending balance of work in process inventory at the end of
November is:
A. 0
C. $61,520
D. $71,360
Material & Labor Variances
Questions 61-65 are based on the following information:
G & N 10e
The Odle Company makes and sells a single product called a Kitt. Odle employs a standard costing system. Each Kitt
has a standard cost of 5 pounds of material at $12 per pound and 0.9 direct labor hours at $15 per hour. There were no
inventories of any kind of June 1. During June, the following events occurred:
 Purchased 17,000 pounds of material at a total cost of $190,000.
 Used 15,000 pounds of material to produce 2,400 Kitts.
 Used 1,900 hours of direct labor time at a total cost of $38,000.
61. To record the incurrence of direct labor cost and its use in production, the general ledger would include what kind of
entry to the Labor Rate Variance account?
A. $ 9,500 credit.
C. $15,200 debit.
B. $ 9,500 debit.
D. $ 2,000 debit.
62. To record the incurrence of direct labor cost and its use in production, the general ledger would include what kind of
entry to the Labor Efficiency Variance account?
A. $7,500 credit.
C. $5,600 credit.
B. $5,600 debit.
D. $3,900 credit.
63. Odle Company purchased material on account. The entry to record the purchase of materials will include a:
A. credit to Work in Process.
C. credit to Accounts Payable.
B. debit to Accounts Receivable.
D. credit to Raw Materials Inventory.
64. To record the purchase of direct materials, the general ledger would include what kind of entry to the Materials Price
Variance Account?
A. $14,000 credit.
C. $10,000 credit.
B. $14,000 debit.
D. $10,000 debit.
65. To record the use of direct materials in production, the general ledger would include what kind of entry to the
Materials Quantity Variance Account?
A. $46,000 debit.
C. $60,000 debit.
B. $60,000 credit.
D. $36,000 debit.
Questions 1 thru 4 are based on the following information.
AICPA adapted
Kaiser Manufacturing Company uses a standard cost system in accounting for the costs of production of its only product,
Product A. The standards for the production of one unit of Product A are as follows:
Direct materials:
10 feet of Item 1 at $.78 per foot and 3 feet of Item 2 at $1 per foot
Direct labor:
4 hours at $3.60 per hour
Factory overhead: applied at 150% of standard direct labor costs
There was no inventory on hand at the end of the year. Materials price variances are isolated at purchase. Following is
a summary of costs and related data for the production of Product A during the year:

100,000 feet of Item 1 were purchased at $.75 per foot.

30,000 feet of Item 2 were purchased at $.90 per foot.

8,000 units of Product A were produced that required 78,000 feet of Item 1, 26,000 feet of Item 2, and
31,000 hours of direct labor at $3.50 per hour.

6,000 units of Product A were sold.
205
. The total debits to the direct materials account for the purchase of Item 1 should be:
A. $75,000
B. $78,000
C. $58,500
D. $60,000
206
. The total debits to the work in process account for direct labor should be:
A. $111,600
C. $112,000
B. $108,500
D. $115,200
207
. Before allocation of standard variances, the balance in the materials quantity variance account of Item 2 was:
A. $2,000 debit
D. $600 debit
B. $1,000 credit
E. $1,000 debit
C. $2,600 debit
208
. If all standard variances are prorated to inventories and cost of goods sold, the amount of materials quantity
variance for Item 2 to be prorated to direct materials inventory would be:
A. $500 debit
D. $333 credit
B. $500 credit
E. $333 debit
C. 0
Questions 77 thru 80 are based on the following information.
G & N 9e
The Dexon Company makes and sells a single product called a Mip and employs a standard costing system. The
following standards have been established for one unit of Mip:
Standard Quantity or Hours
Standard Cost per Mip
Direct materials
6 board feet
$9.00
Direct labor
0.8 hours
$9.60
There were no inventories of any kind on August 1. During August, the following events occurred:
 Purchased 15,000 board feet at the total cost of $24,000.
 Used 12,000 board feet to produce 2,100 Mips.
 Used 1,700 hours of direct labor time at a total cost of $20,060.
77. To record the purchase of direct materials, the general ledger would include what entry to the Materials Price
Variance Account? (M)
a. $1,500 credit
c. $6,000 credit
b. $1,500 debit
d. $6,000 debit
78. To record the use of direct materials in production, the general ledger would include what entry to the Materials
Quantity Variance account? (M)
a. $3,600 debit
c. $900 debit
b. $3,600 credit.
d. $900 credit
79. To record the incurrence of direct labor cost and its use in production, the general ledger would include what entry to
the Labor Rate Variance account? (M)
a. $240 credit
c. $340 debit
b. $240 debit
d. $340 credit
80. To record the incurrence of direct labor costs and its use in production, the general ledger would include what entry
to the Labor Efficiency Variance account? (M)
a. $480 credit
c. $1,200 debit
b. $240 debit
d. $1,200 credit
Closing of Over (under) Applied Overhead
36. The operations of the Kerry Company resulted in underapplied overhead of $5,000. The entry to close out this
balance to Cost of Goods Sold and the effect of the underapplied overhead on Cost of Goods Sold would be:
& N 10e
Entry
Effect on Cost of Goods Sold
A.
Manufacturing Overhead
5,000
Deduct $5,000
Cost of Goods Sold
5,000
B.
Cost of Goods Sold
5,000
Deduct $5,000
Manufacturing
Overhead
5,000
C.
Cost of Goods Sold
5,000
Add $5,000
Manufacturing
Overhead
5,000
D.
Manufacturing Overhead
5,000
Add $5,000
Cost of Goods Sold
5,000
G
COMPREHENSIVE
Total Variance
29. 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 (M)
a. P7,500 unfavorable
b. P8,400 unfavorable
c. P9,000 favorable
d. P9,00 favorable
RPCPA 1094
DM and DL Variances
Questions 127 and 128 are based on the following information.
CIA 0595 III-81 & 82
A company manufactures a machine component called Omega. The following relates to manufacturing operations in
May.
Planned production
2,000 units of Omega
Actual production
2,100 units of Omega
Standard costs per unit of Omega
Direct materials
$20
(5 lbs. @ $4)
Direct labor
$10
(1 hr. @ $10)
Actual costs incurred
Direct materials purchased and used $44,772
(10,920 lbs. @ $4.10)
Direct labor
$20,500
(2,000 hr. @ $10.25)
209
. The direct materials efficiency variance was (E)
A. $1,092 unfavorable.
C. $3,680 unfavorable.
B. $1,680 unfavorable.
D. $3,772 unfavorable.
210
. The direct labor flexible budget variance was (E)
A. $500 favorable.
C. $1,000 favorable.
B. $500 unfavorable.
D. $0
Questions 129 and 130 are based on the following information.
RPCPA 1082
The Sta. Anita Company has a budgeted normal monthly capacity of 5,000 labor hours with a standard production of
4,000 units are this capacity. Standard costs are:
Materials
- 2 kilos at P1.00
Labor
- P8.00 per hour
Factory overhead at normal capacity
Fixed expenses
- P5,000
Variable expenses
- P1.50 per labor hour
During September, actual factory overhead totaled P11,250 and 4,500 labor hours cost P33,750. Production during the
month was 3,500 units using 7,200 kilos of materials at a cost of P1.02 per kilo.
*.
The material price variance during September was (M)
a. P1,440 unfavorable
d. P3,440 unfavorable
b. P204 favorable
e. None of the above
c. P140 favorable
*.
The labor efficiency variance was (E)
a. P2,250 unfavorable
b. P1,000 unfavorable
c. P2,187.50 favorable
d. P62.50 favorable
Questions 131 through 133 are based on the following information.
CIA 0594 III-72 to 74
A company manufactures one product and has a standard cost system. In April the company had the following
experience:
Direct Materials
Direct Labor
Actual $/unit of input (lbs. & hrs.)
$28
$18
Standard price/unit of input
$24
$20
Standard inputs allowed per unit of output
10
4
Actual units of input
190,000
78,000
Actual units of output
20,000
20,000
211
. The direct materials price variance for April is (M)
A. $760,000 favorable.
C. $240,000 unfavorable.
B. $760,000 unfavorable.
D. $156,000 favorable.
212
. The direct materials efficiency variance for April is (M)
A. $156,000 favorable.
C. $240,000 unfavorable.
B. $240,000 favorable.
D. $760,000 unfavorable.
213
. The direct labor rate variance for April is (E)
A. $240,000 favorable.
B. $156,000 unfavorable.
C. $156,000 favorable.
D. $40,000 unfavorable.
Questions 32 thru 34 are based on the following information.
H&M
Rinker Company produced 100 units of Product X. The total standard and actual costs for materials and direct labor for
the 100 units of Product X are as follows:
Raw materials:
Standard
Actual
Standard: 100 pounds at $2.00 per pound
$200
Actual: 110 pounds at $1.90 per pound
$209
Direct labor:
Standard: 200 hours at $10 per hour
2,000
Actual: 184 hours at $11 per hour
2,024
214
. What is the material usage variance for Rinker Company?
a. $9 (U)
d. $11 (U)
b. $20 (F)
e. $20 (U)
c. $11 (F)
215
. What is the material price variance for Rinker Company?
a. $9 (U)
d. $11 (U)
b. $20 (F)
e. $20 (U)
c. $11 (F)
216
. What is the labor efficiency variance for Rinker Company?
a. $160 (U)
d. $160 (F)
b. $184 (F)
e. $24 (U)
c. $184 (U)
Questions 134 through 137 are based on the following information.
CMA 1291 3-1 to 4
Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow
has established the following standards for the prime costs of one unit of product.
Standard Quantity
Standard Price
Standard Cost
Direct materials
8 pounds
$1.80 per pound
$14.40
Direct labor .
25 hour
8.00 per hour
2.00
$16.40
During November, Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory
wages for November were $42,000, 90% of which were for direct labor. Arrow manufactured 19,000 units of product
during November using 142,500 pounds of direct materials and 5,000 direct labor hours.
217
. The direct materials purchase price variance for November is (E)
A. $16,000 favorable.
C. $14,250 favorable.
B. $16,000 unfavorable.
D. $14,250 unfavorable.
218
. The direct materials usage (quantity) variance for November is (E)
A. $14,400 unfavorable.
B. $1,100 favorable.
C. $17,100 unfavorable.
D. $17,100 favorable.
219
. The direct labor price (rate) variance for November is (E)
A. $2,200 favorable.
C. $2,000 unfavorable.
B. $1,900 unfavorable.
D. $2,090 favorable.
220
. The direct labor usage (efficiency) variance for November is (E)
A. $2,200 favorable.
C. $2,000 unfavorable.
B. $2,000 favorable.
D. $1,800 unfavorable.
Questions 138 through 141 are based on the following information.
CMA 0692 3-18 to 21
Jackson Industries, which employs a standard cost system in which direct materials inventory is carried at standard cost.
Jackson has established the following standards for the prime costs of one unit of product. During May, Jackson
purchased 125,000 pounds of direct materials at a total cost of $475,000. The total factory wages for May were
$364,000, 90% of which were for direct labor.
Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct materials and 28,000 direct
labor hours.
Standard Quantity
Standard Price
Standard Cost
Direct materials
5 pounds
$3.60/pound
$18.00
Direct labor
1.25 hours
$12.00/hr.
15.00
$33.00
221
. The purchase price variance for the direct materials acquired by Jackson Industries during May is (E)
a. $21,600 favorable.
c. $28,000 favorable.
b. $25,000 unfavorable.
d. $21,600 unfavorable.
222
. The direct materials usage (quantity) variance for May is (E)
A. $7,200 unfavorable.
C. $5,850 unfavorable.
B. $7,600 favorable.
D. $7,200 favorable.
223
. The direct labor price (rate) variance for May is (E)
A. $8,400 favorable.
C. $8,400 unfavorable.
B. $7,200 unfavorable.
D. $6,000 favorable.
224
. The direct labor usage (efficiency) variance for May is (E)
A. $5,850 favorable.
C. $5,850 unfavorable.
B. $6,000 unfavorable.
D. $6,000 favorable.
Questions 78-82 are based on the following information:
G & N 10e
The Geurtz Company uses standard costing. The company makes and sells a single product called a Roff. The following
data are for the month of August:
 Actual cost of direct material purchased and used: $65,560
 Material price variance: $5,960 unfavorable
 Total materials variance: $22,360 unfavorable
 Standard cost per pound of material: $4
 Standard cost per direct labor hour: $5
 Actual direct labor hours: 6,500 hours
 Labor efficiency variance: $3,500 favorable
 Standard number of direct labor hours per unit of Roff: 2 hours
 Total labor variance: $400 unfavorable
78. The total number of units of Roff produced during August was:
A. 10,800.
C. 3,600.
B. 14,400.
D. 6,500.
79. The standard material allowed to produce one unit of Roff was:
A. 1 lb.
C. 3 lbs.
B. 4 lbs.
D. 2 lbs.
80. The actual material cost per pound was:
A. $4.00.
B. $3.67.
C. $3.30.
D. $4.40.
81. The actual direct labor rate per hour was:
A. $ 5.60.
B. $ 5.00.
C. $10.00.
D. $ 4.40.
82. The labor rate variance was:
A. $3,900 favorable.
B. $3,900 unfavorable.
C. $3,100 unfavorable.
D. $3,100 favorable.
Questions 52 through 55 are based on the following information.
The following July information is for Kingston Company:
Standards:
Material
3.0 feet per unit @ $4.20 per foot
Labor
2.5 hours per unit @ $7.50 per hour
Actual:
Production
2,750 units produced during the month
Material
8,700 feet used; 9,000 feet purchased @ $4.50 per foot
Labor
7,000 direct labor hours @ $7.90 per hour
Barfield
(Round all answers to the nearest dollar.)
52. What is the material price variance (calculated at point of purchase)?
a. $2,700 U
c. $2,610 F
b. $2,700 F
d. $2,610 U
53. What is the material quantity variance?
a. $3,105 F
b. $1,050 F
c. $3,105 U
d. $1,890 U
54. What is the labor rate variance?
a. $3,480 U
b. $3,480 F
c. $2,800 U
d. $2,800 F
55. What is the labor efficiency variance?
a. $1,875 U
b. $938 U
c. $1,875 U
d. $1,125 U
Questions 61 through 64 are based on the following information.
Barfield
The following March information is available for Batt Manufacturing Company when it produced 2,100 units:
Standard:
Material
2 pounds per unit @ $5.80 per pound
Labor
3 direct labor hours per unit @ $10.00 per hour
Actual:
Material
Labor
4,250 pounds purchased and used @ $5.65 per pound
6,300 direct labor hours at $9.75 per hour
61. What is the material price variance?
a. $637.50 U
b. $637.50 F
c. $630.00 U
d. $630.00 F
62. What is the material quantity variance?
a. $275 F
b. $290 F
c. $290 U
d. $275 U
63. What is the labor rate variance?
a. $1,575 U
b. $1,575 F
c. $1,594 U
d. $0
64. What is the labor efficiency variance?
a. $731.25 F
b. $731.25 U
c. $750.00 F
d. none of the above
Questions 57 thru 60 are based on the following information.
G & N 9e
Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan
has established the following standards for the prime costs of one unit of product:
Standard Quantity
Standard Price
Standard Cost
Direct materials ....
6 pounds
$ 3.50/pound
$21.00
Direct labor ........
1.3 hours
$11.00/hour
14.30
$35.30
During March, Bryan purchased 165,000 pounds of direct material at a total cost of $585,750. The total factory wages for
March were $400,000, 90 percent of which were for direct labor. Bryan manufactured 25,000 units of product during
March using 151,000 pounds of direct material and 32,000 direct labor hours.
57. The price variance for the direct material acquired by the company during March is: (M)
a. $7,550 favorable.
c. $7,550 unfavorable.
b. $8,250 unfavorable.
d. $8,250 favorable.
58. The direct material quantity variance for March is: (M)
a. $3,500 unfavorable.
c. $3,500 favorable.
b. $3,550 favorable.
d. $3,550 unfavorable.
59. The direct labor rate variance for March is: (E)
a. $ 8,000 favorable.
c. $ 8,000 unfavorable.
b. $48,000 unfavorable.
d. $48,000 favorable.
60. The direct labor efficiency variance for March is: (E)
a. $5,625 unfavorable.
c. $5,625 favorable.
b. $5,500 favorable.
d. $5,500 unfavorable.
Questions 81 thru 84 are based on the following information.
G & N 9e
The Alpha Company produces toys for national distribution. Standards for a particular toy are:
Materials:
12 ounces per unit at 56¢ per ounce.
Labor:
2 hours per unit at $2.75 per hour.
During the month of December, the company produced 1,000 units. Information for the month follows:

Materials: 14,000 ounces were purchased and used at a total cost of $7,140.

Labor: 2,500 hours worked at a total cost of $8,000.
81. The materials price variance is: (E)
a. $700 U.
c. $420 F.
b. $420 U.
d. $700 F.
82. The materials quantity variance is: (E)
a. $1,120 U.
b. $1,820 F.
c. $1,820 U.
d. $1,120 F.
83. The labor rate variance is: (E)
a. $2,500 F.
b. $1,125 F.
c. $1,125 U.
d. $2,500 U.
84. The labor efficiency variance is: (E)
a. $1,600 U.
b. $1,375 U.
c. $1,375 F.
d. $1,600 F.
Questions 56 through 60 are based on the following information.
Barfield
Timothy Company has the following information available for October when 3,500 units were produced (round answers
to the nearest dollar).
Standards:
Material
3.5 pounds per unit @ $4.50 per pound
Labor
5.0 hours per unit @ $10.25 per hour
Actual:
Material purchased
12,300 pounds @ $4.25
Material used
11,750 pounds
Labor
17,300 direct labor hours @ $10.20 per hour
56. What is the labor rate variance?
a. $875 F
b. $865 F
c. $865 U
d. $875 U
57. What is the labor efficiency variance?
a. $2,050 F
b. $2,050 U
c. $2,040 U
d. $2,040 F
58. What is the material price variance (based on quantity purchased)?
a. $3,075 U
c. $2,938 F
b. $2,938 U
d. $3,075 F
59. What is the material quantity variance?
a. $2,250 F
b. $2,250 U
c. $225 F
d. $2,475 U
60. Assume that the company computes the material price variance on the basis of material issued to production. What
is the total material variance?
a. $2,850 U
c. $5,188 F
b. $5,188 U
d. $2,850 F
Questions 70-73 are based on the following information:
G & N 10e
The Thompson Company uses standard costing and has established the following direct material and direct labor
standards for each unit of Lept.
Direct materials
2 gallons at $4 per gallon
Direct labor
0.5 hours at $8 per hour
During September, the company made 6,000 Lepts and incurred the following costs:
Direct materials purchased
Direct materials used
Direct labor used
13,400 gallons at $4.10 per gallon
12,600 gallons
2,800 hours at $7.65 per hour
70. The material price variance for September was:
A. $1,340 favorable.
C. $1,260 unfavorable.
B. $1,260 favorable.
D. $1,340 unfavorable.
71. The material quantity variance for September was:
A. $2,460 unfavorable.
C. $2,400 unfavorable.
B. $5,600 unfavorable.
D. $5,740 unfavorable.
72. The labor rate variance for September was:
A. $1,530 unfavorable.
B. $ 980 favorable.
C. $ 280 favorable.
D. $ 980 unfavorable.
73. The labor efficiency variance for September was:
A. $33,600 favorable.
C. $22,400 favorable.
B. $ 1,600 favorable.
D. $ 3,200 favorable.
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 111 THROUGH 113.
Horngren
Ruben’s Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the
variances. F denotes a favorable variance and U denotes an unfavorable variance.
Variances
Flexible Budget
Price
Efficiency
Material A
$20,000
$1,000F
$3,000U
Material B
30,000
500U
1,500F
Direct manufacturing labor
40,000
500U
2,500F
111. The MOST likely explanation of the above variances for Material A is that (M)
a. a lower price than expected was paid for Material A.
b. higher-quality raw materials were used than were planned.
d. the company used a higher-priced supplier.
d. Material A used during September was $2,000 less than expected.
225
. The actual amount spent for Material B was (E)
a. $28,000.
c. $30,000.
b. $29,000.
d. $31,000.
113.The MOST likely explanation of the above direct manufacturing labor variances is that (M)
a. the average wage rate paid to employees was less than expected.
b. employees did not work as efficiently as expected to accomplish the job.
c. the company may have assigned more experienced employees this month than originally planned.
d. management may have a problem with budget slack and be using lax standards for both labor-wage rates and
expected efficiency.
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 96 THROUGH 100.
Horngren
Robb Industries Inc. (RII) developed standard costs for direct material and direct labor. In 2004, RII estimated the
following standard costs for one of their major products, the 10-gallon plastic container.
Budgeted quantity
Budgeted price
Direct materials
0.10 pounds
$30 per pound
Direct labor
0.05 hours
$15 per hour
During June RII produced and sold 5,000 containers using 490 pounds of direct materials at an average cost per pound
of $32 and 250 direct manufacturing labor-hours at an average wage of $15.25 per hour.
226
. June’s direct material flexible-budget variance is (E)
a. $980 unfavorable.
c. $680 unfavorable.
b. $300 favorable.
d. none of the above.
227
. June’s direct material price variance is (E)
a. $980 unfavorable.
b. $300 favorable.
228
c. $680 favorable.
d. none of the above.
. June’s direct material efficiency variance is (E)
a. $980 unfavorable.
c. $680 favorable.
b. $300 favorable.
d. none of the above.
229
. June’s direct manufacturing labor price variance is (E)
a. $62.50 unfavorable.
c. $3,811.75 unfavorable.
b. $62.50 favorable.
d. none of the above.
230
. June’s direct manufacturing labor efficiency variance is
a. $62.50 unfavorable.
c. $3,811.75 unfavorable.
b. $62.50 favorable.
d. none of the above.
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 101 THROUGH 106.
Horngren
Sawyer Industries Inc. (SII) developed standard costs for direct material and direct labor. In 2004, SII estimated the
following standard costs for one of their major products, the 30-gallon heavy-duty plastic container.
Budgeted quantity
Budgeted price
Direct materials
0.20 pounds
$25 per pound
Direct labor
0.10 hours
$15 per hour
During July SII produced and sold 10,000 containers using 2,200 pounds of direct materials at an average cost per
pound of $24 and 1,050 direct manufacturing labor hours at an average wage of $14.75 per hour.
231
. July’s direct material flexible-budget variance is (E)
a. $2,800 unfavorable.
c. $5,000 unfavorable.
b. $2,200 favorable.
d. none of the above.
232
. July’s direct material price variance is (E
a. $2,800 favorable.
b. $2,200 favorable.
c. $5,000 unfavorable.
d. none of the above.
233
. July’s direct material efficiency variance is (E)
a. $2,800 unfavorable.
c. $5,000 unfavorable.
b. $2,200 favorable.
d. none of the above.
234
. July’s direct manufacturing labor flexible-budget variance is (E)
a. $750.00 unfavorable.
c. $487.50 unfavorable.
b. $262.50 favorable.
d. none of the above.
235
236
. July’s direct manufacturing labor price variance is (E)
a. $750.00 unfavorable.
c. $487.50 favorable.
b. $262.50 favorable.
d. none of the above.
. July’s direct manufacturing labor efficiency variance is
a. $750.00 unfavorable.
c. $487.50 favorable.
b. $262.50 favorable.
d. none of the above.
Questions 66-69 are based on the following information:
G & N 10e
Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow
has established the following standards for the prime costs of one unit of product.
Standard Quantity
Standard Price
Standard Cost
Direct materials
8 pounds
$1.80 per pound
$14.40
Direct labor
0.25 hour
$8.00 per hour
$ 2.00
During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages
for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material
and 5,000 direct labor hours.
66. The direct material price variance for May is:
A. $16,000 favorable.
B. $16,000 unfavorable.
C. $14,250 favorable.
D. $14,250 unfavorable.
67. The direct material quantity variance for May is:
A. $14,400 unfavorable.
C. $17,100 unfavorable.
B. $1,100 favorable.
D. $17,100 favorable.
68. The direct labor rate variance for May is:
A. $2,200 favorable.
B. $1,900 unfavorable.
C. $2,000 unfavorable.
D. $2,090 favorable.
69. The direct labor efficiency variance for May is:
A. $2,200 favorable.
C. $2,000 unfavorable.
B. $2,000 favorable.
D. $1,800 unfavorable.
DM & DL Mix & Yield Variances
Questions 96 through 101 are based on the following information.
Barfield
Xtra Klean manufactures a cleaning solvent. The company employs both skilled and unskilled workers. Skilled workers
class C are paid $12 per hour, while unskilled workers class D are paid $7 per hour. To produce one 55-gallon drum of
solvent requires 4 hours of skilled labor and 2 hours of unskilled labor. The solvent requires 2 different materials: A and
B. The standard and actual material information is given below:
Standard:
Material A:
30.25 gallons @ $1.25 per gallon
Material B:
24.75 gallons @ $2.00 per gallon
Actual:
Material A:
10,716 gallons purchased and used @ $1.50 per gallon
Material B:
17,484 gallons purchased and used @ $1.90 per gallon
Skilled labor hours:
1,950 @ $11.90 per hour
Unskilled labor hours:
1,300 @ $7.15 per hour
During the current month Xtra Klean manufactured 500 55-gallon drums. (Round all answers to the nearest whole
dollar.)
96. What is the total material price variance?
a. $877 F
b. $877 U
c. $931 U
d. $931 F
97. What is the total material mix variance?
a. $3,596 F
b. $3,596 U
c. $4,864 F
d. $4,864 U
98. What is the total material yield variance?
a. $1,111 U
b. $1,111 F
c. $2,670 U
d. $2,670 F
99. What is the labor rate variance?
a. $0
b. $1,083 U
c. $2,583 U
d. $1,083 F
100.What is the labor mix variance?
a. $1,083 U
b. $2,588 U
c. $1,083 F
d. $2,588 F
101.What is the labor yield variance?
a. $2,583 U
b. $2,583 F
c. $1,138 F
d. $1,138 U
Total Variance and DL Variance
Questions 142 and 143 are based on the following information.
RPCPA 0583
Edsol Company uses flexible budget in its standard cost system to develop variances. The following selected data are
given.
Data on standard costs:
Raw materials per unit
5 lbs. at P1.00/lb., P5.00
Direct labor per unit
8 hrs. at P3.00/hr., P24.00
Variable factory overhead per unit
P3.00 per direct labor hour, P24.00
Fixed factory overhead per month
P25,000
Normal activity per month
8,000 direct labor hours
Units produced in April
1,000 units
Costs incurred for April
Raw materials
5,000 lbs. at P1.10/lb.
Direct labor
7,000 lbs. at P3.10/hr.
Variable factory overhead
P27,000
Fixed factory overhead
P28,000
*. The total variance to be explained for April is (M)
a. P4,200 favorable
c. P5,200 favorable
b. P4,200 unfavorable
d. P5,200 unfavorable
*.
The labor efficiency variance for April is (M)
a. P3,000 favorable
b. P3,000 unfavorable
c. P3,100 favorable
d. P3,100 unfavorable
DM and OH Variances
Questions 144 through 148 are based on the following information.
Gleim
Funtime, Inc, manufactures video game machines. Market saturation and technological innovations have caused pricing
pressures which have resulted in declining profits. To stem the slide in profits until new products can be introduced, an
incentive program has been developed to reward production managers who contribute to an increase in the number of
units produced and effect cost reductions.
The managers have responded to the pressure of improving manufacturing in several ways. The video game machines
are put together by the Assembly Group which requires parts from both the Printed Circuit Boards (PCB) and the
Reading Heads (RH) groups. To attain increased production levels, the PCB and RH groups commenced rejecting parts
that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on
machines used in the production of these parts has been postponed with only emergency repair work being performed to
keep production lines moving.
The more aggressive Assembly Group production supervisors have pressured maintenance personnel to attend to their
machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH groups which,
when coupled with demands for accelerated parts delivery by the Assembly Group, has led to more frequent parts
rejections and increased friction among departments.
Funtime operates under a standard cost system. The standard costs for video game machines are as follows:
Standard Cost per Unit
Cost Item
Quantity
Cost
Total
Direct Materials
Housing unit
1
$20
$20
Printed circuit boards
2
15
30
Reading heads
4
10
40
Direct labor
Assembly group
2 hours
8
16
PCB group
1 hour
9
9
RH group
1.5 hours
10
15
Variable overhead
4.5 hours
2
9
Total standard cost per unit
$139
Funtime prepares monthly performance reports based on standard costs. Presented below is the contribution report for
May, when production and sales both reached 2,200 units.
Funtime Inc.
Contribution Report
For the Month of May
Budget
Actual
Variance
Units
2,000
2,200
200F
Revenue
$400,000
$440,000
$40,000F
Variable costs
Direct material
180,000
220,400
40,400U
Direct labor
80,000
93,460
13,460U
Variable overhead
18,000
18,800
800U
Total variable costs
278,000
332,660
54,660U
Contribution margin
$122,000
$107,340
$14,660U
Funtime’s top management was surprised by the unfavorable contribution to overall corporate profits in spite of the
increased sales in May. Jack Rath, cost accountant, was assigned to identify to reasons for the unfavorable contribution
results as well as the individuals or groups responsible. After review, Rath prepared the Usage Report presented below.
Funtime Inc.
Usage Report
For the Month of May
Cost Item
Quantity
Actual Cost
Direct material
Housing units
2,200 units
$ 44,000
Printed circuit boards
4,700 units
75,200
Reading heads
9,200 units
101,200
Direct labor
Assembly
3,900 hours
31,200
Printed circuit boards
2,400 hours
23,760
Reading heads
3,500 hours
38,500
Variable overhead
9,900 hours
18,800
Total variable cost
$332,660
Rath reported that the PCB and RH groups supported the increased production levels but experienced abnormal
machine downtime, causing idle manpower which required the use of overtime to keep u with the accelerated demand
for parts. The idle time was charged to direct labor. Rath also reported that the production managers of these two
groups resorted to parts rejections, as opposed to testing and modification procedures formerly applied. Rath
determined that the Assembly Group met management’s objectives by increasing production while using lower than
standard hours.
237
. What is the total materials price variance? (M)
a. $346,500 favorable.
c. $13,900 favorable.
b. $346,500 unfavorable
d. $13,900 unfavorable.
238
239
. What is the total materials quantity variance? (M)
a. $8,500 unfavorable.
c. $9,200 unfavorable.
b. $8,500 favorable.
d. $9,200 favorable.
. What is the variable overhead efficiency variance? (M)
a. $0
b. $900 unfavorable.
c. $9,900 unfavorable.
d. $9,900 favorable.
240
. What is the variable overhead spending variance? (M)
a. $1,000 unfavorable.
c. $1,800 unfavorable.
b. $1,000 favorable.
d. $1,800 favorable.
241
. What is the contribution margin volume variance? (M)
a. $9,800 unfavorable.
c. $12,200 favorable.
b. $9,800 favorable.
d. $14,660 unfavorable.
DL and OH Variances
27. 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 (M)
a. P450,000
c. P750,000
b. P500,000
d. P1,200,000
RPCPA 0594
Questions 149 through 151 are based on the following information.
CMA 0692 3-15 to 17
An organization that specializes in reviewing and editing technical magazine articles. It set the following standards for
evaluating the performance of the professional staff:
Annual budgeted fixed costs for normal capacity level of 10,000 articles
$600,000
reviewed and edited
Standard professional hours per 10 articles
200 hours
Flexible budget of standard labor costs to process 10,000 articles
$10,000,000
The following data apply to the 9,500 articles that were actually reviewed and edited during the current year.
Total hours used by professional staff
192,000 hours
Flexible costs
$9,120,000
Total cost
9,738,000
242
. Using a flexible budget, the total cost planned for the review and editing of 9,500 articles should be (D)
A. $9,500,000.
C. $10,100,000.
B. $10,070,000.
D. $10,570,000.
243
. The fixed cost spending variance for the year is (D)
A. $18,000 unfavorable.
C. $48,000 unfavorable.
B. $30,000 favorable.
D. $18,000 favorable.
244
. The labor efficiency variance for the year is (D)
A. $100,000 unfavorable.
C. $380,000 favorable.
B. $238,000 unfavorable.
D. $500,000 favorable.
Questions 152 and 153 are based on the following information.
CMA 0693 3-19 & 20
Tiny Tykes Corporation had the following activity relating to its fixed and variable factory overhead for the month of July.
Actual costs
Fixed overhead
$120,000
Variable overhead
80,000
Flexible budget
(Standard input allowed for actual output achieved x the budgeted rate)
Variable overhead
90,000
Applied
(Standard input allowed for actual output achieved x the budgeted rate)
Fixed overhead
125,000
Variable overhead spending variance
Production volume variance
245
2,000F
5,000U
. If the budgeted rate for applying variable factory overhead was $20 per direct labor hour, how efficient or inefficient
was Tiny Tykes Corporation in terms of using direct labor hours as an activity base? (M)
a. 100 direct labor hours inefficient.
c. 400 direct labor hours inefficient.
b. 100 direct labor hours efficient.
d. 400 direct labor hours efficient.
246
. The fixed factory overhead efficiency variance is (M)
a. $3,000 favorable.
c. $5,000 favorable.
b. $3,000 unfavorable.
d. Never a meaningful variance.
Questions 154 through 156 are based on the following information.
RPCPA 1087
The summarized flexible budget of AAA, Inc. is shown below:
Percent of Normal Operating Capacity
80%
90%
*100%
110%
Variable overhead
P25,000
P30,000
P35,000
P40,000
Fixed overhead
50,000
50,000
50,000
50,000
Total Factory overhead
P75,000
P80,000
P85,000
P90,000
* Normal capacity
According to standards established, 150,000 units of the product should be manufactured at its normal capacity.
Standard labor time per unit of products is ten minutes. Actual production in 1986 was 132,000 units in 24,000 hours.
*.
What is the standard direct labor time allowed to finish 132,000 units? (E)
a. 22,000 hours
c. 25,000
b. 24,000 hours
d. none of these
*.
What is the standard variable factory overhead rate? (E)
a. P0.96
c. P1.40
b. P1.00
d. none of the above
*.
What is the standard fixed factory overhead rate? (E)
a. P1.50
c. P2.00
b. P1.75
d. none of the above
Questions 157 through 161 are based on the following information.
CMA 1294 3-26 to 30
Water Control Inc. manufactures water pumps and uses a standard cost system. The standard factory overhead costs
per water pump are based on direct labor hours and are as follows:
Variable overhead (4 hours of $8/hour)
$32
Fixed overhead (4 hours at $5*/per hour
20
Total overhead cost per unit
$52
* Based on a capacity of 100,000 direct labor hours per month.
The following additional information is available for the month of November.
 22,000 pumps were produced although 25,000 had been scheduled for production.
 94,000 direct labor hours were worked at a total cost of $940,000.
 The standard direct labor rate is $9 per hour.
 The standard direct labor time per unit is 4 hours.
 Variable overhead costs were $740,000.
 Fixed overhead costs were $540,000.
247
. The fixed overhead spending variance for November was (E)
a. $40,000 unfavorable.
c. $460,000 unfavorable.
b. $70,000 unfavorable.
d. $240,000 unfavorable.
248
. The variable overhead spending variance for November was (E)
a. $60,000 favorable.
c. $48,000 unfavorable.
b. $12,000 favorable.
d. $40,000 unfavorable.
249
. The variable overhead efficiency variance for November was (E)
a. $48,000 unfavorable.
c. $96,000 unfavorable.
b. $60,000 favorable.
d. $200,000 unfavorable.
250
. The direct labor price variance for November was (E)
a. $54,000 unfavorable.
c. $60,000 favorable.
b. $94,000 unfavorable.
d. $148,000 unfavorable.
251
. The direct labor efficiency variance for November was (E)
a. $108,000 favorable.
c. $60,000 favorable.
b. $120,000 favorable
d. $54,000 unfavorable.
DL & Variable Overhead Variances
Questions 93 thru 97 are based on the following information.
G & N 9e
The Clark Company makes a single product and uses standard costing. Some data concerning this product for the
month of May follow:
Labor rate variance:..................................
$ 7,000 F
Labor efficiency variance:............................
$12,000 F
Variable overhead efficiency variance:................
$ 4,000 F
Number of units produced:.............................
10,000
Standard labor rate per direct labor hour:............
$12
Standard variable overhead rate per direct labor hour:
$4
Actual labor hours used:..............................
14,000
Actual variable manufacturing overhead costs:.........
$58,290
93. The variable overhead spending variance for May was: (M)
a. $2,290 F.
c. $1,710 F.
b. $2,290 U.
d. $1,710 U.
94. The actual direct labor rate for May in dollars per hour was: (D)
a. $12.50.
c. $11.75.
b. $12.00.
d. $11.50.
95. The total standard cost for direct labor for May was: (D)
a. $168,000.
c. $120,000.
b. $180,000.
d. $161,000.
96. The total standard cost for variable overhead for May was: (D)
a. $56,000.
c. $60,000.
b. $40,000.
d. $50,000.
97. The standard hours allowed to make one unit of finished product are: (D)
a. 1.0.
c. 1.5.
b. 1.2.
d. 2.0.
DM, DL and OH Variances
Questions 3 through 6 are based on the following information.
RPCPA 580
The Willard Manufacturing Co., Inc. uses standard cost systems in accounting for manufacturing costs. On June 1,
19x9, it started the manufacture of a new product known as “Whippy.” The standard costs of a unit of “Whippy” are:
Raw materials
3 kilos @ P1.00 per kilo
P3.00
Direct labor
1 hour @ P4.00 per hour
4.00
Overhead
75% of direct labor cost
3.00
P10.00
The following data were obtained from Willard’s records for the month of June:
Actual production of “Whippy”
2,000 units
Units sold of “Whippy”
1,250 units
Debit
Credit
Sales
P25,000
Purchases
P13,650
Materials price variance
650
Materials quantity variance
500
Direct labor rate variance
380
Direct labor efficiency variance
400
Manufacturing overhead total variance
250
The amount shown above for the materials price variance is applicable to raw materials purchased during June.
3. The actual quantity of raw materials used (in kilos) for the month of June is
a. 3,750 kilos
c. 6,500 kilos
b. 6,000 kilos
d. 6,650 kilos
4. The actual hours worked for the month of June is
a. 1,900 hours
c. 2,000 hours.
b. 1,905 hours
d. 2,100 hours.
5. The actual total overhead for the month of June is
a. P3,750
c. P6,000
b. P5,750
d. P6,250
6. The actual direct labor rate for the month of June is
a. P3.60
c. P4.00
b. P3.80
d. P4.20
Questions 162 through 164 are based on the following information.
RPCPA 1088
MAXIM MFG CO., which uses a standard cost system, manufactures one product with the following standard costs:
Direct materials
2 Kilos at P10
P20.00
Direct labor
1 hour at P8
8.00
Factory overhead
80% of direct labor
6.40
TOTAL STANDARD UNIT COST
P34.40
Total production in units
Direct materials purchased
Actual quantity of materials used
Actual labor cost
Factory overhead total variance
*.
*.
*.
The direct material usage variance is (E)
a. P11,000 unfavorable
b. P20,000 unfavorable
The direct labor efficiency variance is (E)
a. P4,000 favorable
b. P3,750 unfavorable
10,000 units
22,000 kilos at P11
21,000 kilos
9,500 at P7.50
P1,000 unfavotable
c. P10,000 unfavorable
d. P40,000 favorable
c. P3,750 favorable
d. P4,750 favorable
The actual total factory overhead for the month of January is (D)
a. P65,000
c. P57,000
b. P63,000
d. P60,000
Questions 165 through 167 are based on the following information.
RPCPA 0582
Superior Company, which started business on April 1, uses a standard cost system in accounting for manufacturing
costs. The standard costs for a unit of its product are:
Materials: 2 units at P3 per kilo
Labor: 1 hour at P4 per hour
Factory overhead: 75% of direct labor cost
P6.00
4.00
3.00
P13.00
Following data were gathered from Superior’s records for April:
Units produced
Units sold
Sales
Purchases (11,000 kilos)
Materials price variance (applicable to April purchases)
Actual quantity of materials used
Actual labor hours worked
Direct labor rate variance
Factory overhead total variance
*.
The material quantity variance for April was (E)
a. P500
c. P1,500
b. P1,000
d. P2,000
*.
The direct labor efficiency variance for April was (E)
a. P800
c. P200
b. P400
d. P4
5,000
4,000
P100,000
P 38,500
P550 unfavorable
10,500 kilos
4,800 hours
P800 favorable
P500 unfavorable
*.
The actual factory overhead for April was (E)
a. P500
c. P15,000
b. P5,000
d. P15,500
Questions 168 through 171 are based on the following information.
CMA 0696 3-22 to 25
Ardmore Enterprises uses a standard cost system in its small appliance division. The standard cost of manufacturing
one unit of Zeb is as follows:
Materials = 60 pounds at $1.50 per pound
$ 90
Labor = 3 hours at $12 per hour
36
Factory overhead – 3 hours at $8 per hour
24
Total standard cost per unit
$150
The budgeted variable factory overhead rate is $3 per labor hour, and the budgeted fixed factory overhead is $27,000
per month. During May, Ardmore produced 1,650 units of Zeb compared with a normal capacity of 1,800 units. The
actual cost per unit was as follows:
Materials (purchased and used) 58 pounds at $1.65 per pound)
$95.70
Labor = 3.1 hours at $12 per hour
37.20
Factory overhead – $39,930 per 1,650 units
24.20
Total actual cost per unit
$157.10
252
. The total materials quantity variance for May is (E)
a. $14,355 favorable.
c. $4,950 favorable.
b. $14,355 unfavorable.
d. $4,950 unfavorable.
253
254
255
. The materials price variance for May is (E)
a. $14,355 unfavorable.
b. $14,850 unfavorable.
c. $14,355 favorable.
d. $14,850 favorable.
. The labor rate variance for May is (E)
a. $1,920 favorable.
b. $0.
c. $4,950 unfavorable.
d. $4,950 favorable.
. The flexible overhead variance for May is (E)
a. $3,270 unfavorable.
b. $3,270 favorable.
c. $1,920 unfavorable.
d. $1,920 favorable.
Questions 172 through 175 are based on the following information.
Gleim
London Enterprises uses a standard cost system in its appliance division. The standard cost of manufacturing one unit
of Gimmicks is as follows:
Materials – 120 pounds at $1.50 per pound
$180
Labor – 3 hours @ $15 per hour
45
Factory overhead - $16 per labor hour
48
Total standard cost per unit
$273
The budgeted variable factory overhead rate is $6 per labor hour, and the budgeted fixed factory overhead is $54,000
per month. During June, London Enterprises produced 1,650 units of Gimmicks compared with a normal capacity of
1,800 units. The actual cost per unit was
Materials (purchased and used) – 116 pounds at $1.65 per pound
$191.40
Labor – 3.1 hours @ $15 per hour
46.50
Factory overhead ($79,860 for 1,650 units)
48.40
Total standard cost per unit
$286,30
256
. The total materials quantity variance for June is (E)
a. $9,900 favorable.
c. $28,710 favorable.
b. $9,900 unfavorable.
d. $28,710 unfavorable.
257
. The materials price variance for June is (E)
a. $28,710 unfavorable.
b. $29,700 unfavorable
c. $28,710 favorable.
d. $29,700 favorable.
. The labor rate variance for June is (E)
a. $2,700 unfavorable.
b. $2,700 favorable.
c. $2,475 unfavorable.
d. $0
258
259
. The flexible budget overhead variance for June is (E)
a. $0
c. $3,840 unfavorable.
b. $6,540 favorable.
d. $3,840 favorable.
Questions xx thru xx are based on the following information.
The Wade Company has developed the following standards for one of its products.
Direct materials:
20 pounds x $6 per pound
Direct labor:
5 hours x $16 per hour
Variable manufacturing overhead:
5 hours x $4 per hour
The following activity occurred during the month of November:
Materials purchased:
250,000 pounds $5.20 per pound
Materials used:
220,000 pounds
Units produced:
10,000 units
Direct labor:
48,000 hours at $15.00 per hour
Actual variable manufacturing overhead:
$204,000
The company records materials price variances at the time of purchase.
. The direct materials price variance is
a. $32,000 unfavorable
b. $32,000 favorable
c. $48,000 unfavorable
d. $48,000 favorable
. The direct labor efficiency variance is
a. $32,000 favorable
b. $32,000 unfavorable
c. $80,000 unfavorable
d. $80,000 favorable
260
261
H&M
. The variable manufacturing overhead spending variance is
a. $4,000 favorable
c. $8,000 favorable
b. $4,000 unfavorable
d. $12,000 unfavorable
262
. The variable manufacturing overhead efficiency variance is
a. $4,000 favorable
c. $8,000 favorable
b. $4,000 unfavorable
d. $12,000 unfavorable
263
Questions 1 thru 3 are based on the following information.
H&M
Sheridan Manufacturing Company uses a standard cost system. The following information pertains to 1995.
Actual factory overhead costs ($22,000 is fixed)
$53,500
Actual direct labor costs (22,500 hours)
$175,500
Standard direct labor for
11,000 units:
Standard hours allowed
22,000 hrs.
Labor rate
$8.00
The factory overhead rate is based on an activity level of 10,000 units. Standard cost data or 10,000 units is:
Variable factory overhead
$30,000
Fixed factory overhead
18,000
Total factory overhead
$48,000
264
. What is the total labor budget variance for Sheridan Manufacturing Company?
a. $15,500(U)
d. $20,000(U)
b. $4,000(U)
e. $500(F)
c. $4,500(F)
265
. What is the variable overhead efficiency variance for Sheridan Manufacturing Company?
a. $750 (F)
d. $2,250 (F)
b. $4,000 (U)
e. $2,250 (U)
c. $750 (U)
266
. What is the fixed overhead volume variance for Sheridan Manufacturing Company?
a. $1,800 (F)
d. $1,800 (U)
b. $4,800 (F)
e. $3,600 (U)
c. $5,500 (U)
Questions 56-60 are based on the following information:
G & N 10e
Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test
performed:
Standard Hours or
Standard Price or Rate
Quantity
Direct materials
3 pounds
$0.75 per pound
Direct labor
0.4 hours
$12 per hour
Variable manufacturing overhead
0.4 hours
$9 per hour
During March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable
manufacturing overhead is assigned to core tests on the basis of direct labor hours. The following events occurred
during March:
 8,600 pounds of sand were purchased at a cost of $7,310.
 7,200 pounds of sand were used for core tests.
 840 actual direct labor hours were worked at a cost of $8,610.
 Actual variable manufacturing overhead incurred was $3,200.
56. The materials price variance for March is:
A. $860 unfavorable.
B. $860 favorable.
C. $281 unfavorable.
D. $281 favorable.
57. The materials quantity variance for March is:
A. $ 900 favorable.
B. $1,950 favorable.
C. $1,950 unfavorable.
D. $ 900 unfavorable.
58. The labor rate variance for March is:
A. $4,578 unfavorable.
B. $1,470 unfavorable.
C. $4,578 favorable.
D. $1,470 favorable.
59. The labor efficiency variance for March is:
A. $480 favorable.
B. $480 unfavorable.
C. $192 favorable.
D. $192 unfavorable.
60. The variable overhead efficiency variance for March is:
A. $320 unfavorable.
C. $360 unfavorable.
B. $320 favorable.
D. $360 favorable.
Materials, Labor & Variable Overhead Variance
Questions 61 thru 66 are based on the following information. (Set A)
G & N 9e
The Litton Company has established standards as follows:
Direct material
3 lbs. @ $4/lb. = $12 per unit
Direct labor
2 hrs. @ $8/hr. = $16 per unit
Variable manuf. overhead
2 hrs. @ $5/hr. = $10 per unit
Actual production figures for the past year are given below. The company records the materials price variance when
materials are purchased.
Units produced
600
Direct material used
2,000 lbs.
Direct material purchased (3,000 lbs.)
$11,400
Direct labor cost (1,100 hrs.)
$ 9,240
Variable manuf. overhead cost incurred
$ 5,720
The company applies variable manufacturing overhead to products on the basis of direct labor hours.
61. The materials price variance is: (E)
a. $400 U.
b. $400 F.
c. $600 F.
d. $600 U.
62. The materials quantity variance is: (E)
a. $800 U.
b. $4,000 U.
c. $760 U.
d. $760 F.
63. The labor rate variance is: (E)
a. $480 F.
b. $480 U.
c. $440 F.
d. $440 U.
64. The labor efficiency variance is: (E)
a. $800 F.
b. $800 U.
c. $840 F.
d. $840 U.
65. The variable overhead spending variance is: (E)
a. $240 U.
c. $220 F.
b. $220 U.
d. $240 F.
66. The variable overhead efficiency variance is: (E)
a. $520 F.
b. $520 U.
c. $500 U.
d. $500 F.
Questions 67 thru 71 are based on the following information. (Set B)
G & N 9e
The Albright Company uses standard costing and has established the following standards for its single product:
Direct materials ..........
2 gallons at $3 per gallon
Direct labor ..............
0.5 hours at $8 per hour
Variable manuf. overhead ..
0.5 hours at $2 per hour
During November, the company made 4,000 units and incurred the following costs:
Direct materials purchased ........
8,100 gallons at $3.10 per gallon
Direct materials used .............
7,600 gallons
Direct labor used .................
2,200 hours at $8.25 per hour
Actual variable manuf. overhead ...
$4,175
The company applies variable manufacturing overhead to products on the basis of direct labor hours.
67. The material price variance for November was: (E)
a. $2,310 U.
c. $810 U.
b. $2,310 F.
d. $810 F.
68. The material quantity variance for November was: (E)
a. $1,200 U.
c. $300 U.
b. $1,200 F.
d. $1,500 F.
69. The labor rate variance for November was: (E)
a. $1,050 U.
c. $2,150 U.
b. $550 U.
d. $2,150 F.
70. The labor efficiency variance for November was: (E)
a. $1,050 U.
c. $1,600 F.
b. $550 U.
d. $1,600 U.
71 The total variable overhead variance for November was: (M)
a. $175 U.
c. $225 U.
b. $225 F.
d. $400 U.
Questions 72 thru 76 are based on the following information.
G & N 9e
Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one
bag of Fastgro as follows:
Standard Quantity
Standard Cost per Bag
Direct material
20 pounds
$8.00
Direct labor
0.1 hours
1.10
Variable manuf. overhead ..
0.1 hours
.40
The company had no beginning inventories of any kind on Jan. 1. Variable manufacturing overhead is applied to
production on the basis of direct labor hours. During January, the following activity was recorded by the company:
 Production of Fastgro: 4,000 bags
 Direct materials purchased: 85,000 pounds at a cost of $32,300
 Direct labor worked: 390 hours at a cost of $4,875
 Variable manufacturing overhead incurred: $1,475
 Inventory of direct materials on Jan. 31: 3,000 pounds
72. The materials price variance for January is: (M)
a. $1,640 F.
c. $1,700 F.
b. $1,640 U.
d. $1,300 U.
73. The materials quantity variance for January is: (M)
a. $800 U.
c. $300 F.
b. $300 U.
74. The labor rate variance for January is: (M)
a. $475 F.
b. $475 U.
d. $750 F.
c. $585 F.
d. $585 U.
75. The labor efficiency variance for January is: (M)
a. $475 F.
c. $130 U.
b. $350 U.
d. $110 F.
76. The total variance for variable overhead for January is: (M)
a. $85 F.
c. $100 U.
b. $40 F.
d. $125 F.
Overhead Variances
Questions 65 through 74 are based on the following information.
Barfield
Redd Co. uses a standard cost system for its production process and applies overhead based on direct labor hours. The
following information is available for August when Redd made 4,500 units:
Standard:
DLH per unit
2.50
Variable overhead per DLH
$1.75
Fixed overhead per DLH
$3.10
Budgeted variable overhead
$21,875
Budgeted fixed overhead
$38,750
Actual:
Direct labor hours
10,000
Variable overhead
$26,250
Fixed overhead
$38,000
65. Using the one-variance approach, what is the total overhead variance?
a. $6,062.50 U
c. $9,687.50 U
b. $3,625.00 U
d. $6,562.50 U
66. Using the two-variance approach, what is the controllable variance?
a. $5,812.50 U
c. $4,375.00 U
b. $5,812.50 F
d. $4,375.00 F
67. Using the two-variance approach, what is the noncontrollable variance?
a. $3,125.00 F
c. $3,875.00 F
b. $3,875.00 U
d. $6,062.50 U
68. Using the three-variance approach, what is the spending variance?
a. $4,375 U
c. $8,000 U
b. $3,625 F
d. $15,750 U
69. Using the three-variance approach, what is the efficiency variance?
a. $9,937.50 F
c. $2,187.50 U
b. $2,187.50 F
d. $2,937.50 F
70. Using the three-variance approach, what is the volume variance?
a. $3,125.00 F
c. $3,875.00 U
b. $3,875.00 F
d. $6,062.50 U
71. Using the four-variance approach, what is the variable overhead spending variance?
a. $4,375.00 U
c. $8,750.00 U
b. $4,375.00 F
d. $6,562.50 U
72. Using the four-variance approach, what is the variable overhead efficiency variance?
a. $2,187.50 U
c. $2,187.50 F
b. $9,937.50 F
d. $2,937.50 F
73. Using the four-variance approach, what is the fixed overhead spending variance?
a. $7,000 U
c. $750 U
b. $3,125 F
d. $750 F
74. Using the four-variance approach, what is the volume variance?
a. $3,125 F
c. $6,063 U
b. $3,875 F
d. $3,875 U
Questions 75 through 84 are based on the following information.
Barfield
Spots Inc. uses a standard cost system for its production process. Spots applies overhead based on direct labor hours.
The following information is available for July:
Standard:
Direct labor hours per unit
2.20
Variable overhead per hour
$2.50
Fixed overhead per hour (based on 11,990 DLHs)
$3.00
Actual:
Units produced
4,400
Direct labor hours
8,800
Variable overhead
$29,950
Fixed overhead
$42,300
75. Using the four-variance approach, what is the variable overhead spending variance?
a. $7,950 U
c. $7,975 U
b. $25 F
d. $10,590 U
76. Using the four-variance approach, what is the variable overhead efficiency variance?
a. $9,570 F
c. $2,200 F
b. $9,570 U
d. $2,200 U
77. Using the four-variance approach, what is the fixed overhead spending variance?
a. $15,900 U
c. $6,930 U
b. $6,330 U
d. $935 F
78. Using the four-variance approach, what is the volume variance?
a. $6,930 U
c. $0
b. $13,260 U
d. $2,640 F
79. Using the three-variance approach, what is the spending variance?
a. $23,850 U
c. $14,280 F
b. $23,850 F
d. $14,280 U
80. Using the three-variance approach, what is the efficiency variance?
a. $11,770 F
c. $7,975 U
b. $2,200 F
d. $5,775 U
81. Using the three-variance approach, what is the volume variance?
a. $13,260 U
c. $6,930 U
b. $2,640 F
d. $0
82. Using the two-variance approach, what is the controllable variance?
a. $21,650 U
c. $5,775 U
b. $16,480 U
d. $12,080 U
83. Using the two-variance approach, what is the noncontrollable variance?
a. $26,040 F
c. $6,930 U
b. $0
d. $13,260 U
84. Using the one-variance approach, what is the total variance?
a. $19,010 U
c. $12,705 U
b. $6,305 U
d. $4,730 U
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 111 THROUGH 115.
Horngren
Variances
Spending
Efficiency
Production-Volume
Variable manufacturing overhead $ 4,500 F
$15,000 U
(B)
Fixed manufacturing overhead
$10,000 U
(A)
$40,000 U
111. Above is a (E)
a. 4-variance analysis.
b. 3-variance analysis.
c. 2-variance analysis.
d. 1-variance analysis.
112. In the above chart, the amounts for (A) and (B), respectively, are
a. $10,500 U; $55,000 U
c. Zero; $55,000 U
b. $10,500 U; Zero
d. Zero; Zero
267
. In a 3-variance analysis the spending variance should be (E)
a. $ 4,500 F.
c. $ 5,500 U.
b. $10,000 U.
d. $10,500 U.
268
. In a 2-variance analysis the flexible-budget variance and the production-volume variance should be __________,
respectively.
a. $5,500 U; $55,000 U
c. $10,500 U; $50,000 U
b. $20,500 U; $40,000 U
d. $60,500 U; Zero
269
. In a 1-variance analysis the total overhead variance should be (E)
a. $20,500 U.
c. $121,000 U.
b. $60,500 U.
d. none of the above.
Relevant Costing
Questions 176 through 182 are based on the following information.
Gleim
PortCo Products is a divisionalized furniture manufacturer. The divisions are autonomous segments, with each division
being responsible for its own sales, costs of operations, working capital management, and equipment acquisition. Each
division serves a different market in the furniture industry. Because the markets and products of the divisions are so
different, there have never been any transfers between divisions.
The Commercial Division manufactures equipment and furniture that is purchased by the restaurant industry. The
division plans to introduce a new line of counter and chair units that feature a cushioned seat with Russ Fiegel of the
Office Division. They both believe a cushioned seat currently made by the Office Division for use on its deluxe office
stool could be modified for use on the new counter chair. Consequently, Kline has asked Russ Fiegel for a price for 100unit lots of the cushioned seat. The following conversation took place about the price to be charged for the cushioned
seats:
Fiegel: “John, we can make the necessary modifications to the cushioned seat easily. The raw materials used in your
seat are slightly different and should cost about 10% more than those used in our deluxe office stool. However, the labor
time should be the same because the seat fabrication operation basically is the same. I would price the seat at our
regular rate – full cost plus 30% markup.”
Kline: “That’s higher than I expected, Russ. I was thinking that a good price would be your variable manufacturing
costs. After all, your capacity costs will be incurred regardless of this job.”
Fiegel: “John, I’m at capacity. By making the cushion seats for you, I’ll have to cut my production of deluxe office stools.
Of course, I can increase my production of economy office stools. The labor time freed by not having to fabricate the
frame or assemble the deluxe stool can be shifted to the frame fabrication and assembly of the economy office stool.
Fortunately, I can switch my labor force between these two models of stools without any loss of efficiency. As you know,
overtime is not a feasible alternative in our community. I’d like to sell it to you at variable cost, but I have excess demand
for both products. I don’t mind changing my product mix to the economy model if I get a good return on the seats I make
for you. Here are my standard costs for the two stools and a schedule of my manufacturing overhead.:
Kline: “I guess I see your point, Russ, but I don’t want to price myself out of the market. Maybe we should talk to
Corporate to see if they can give us any guidance.”
Office Division
Standard Costs and Prices
Deluxe
Office Stool
Raw materials
Framing
$ 8.15
Cushioned seats
Padding
2.40
Vinyl
4.00
Molded seat
(purchased)
Direct labor
Frame
3.75 (0.5x$7.50/DLH)
fabrication(0.5x$7.50/
DLH)
Cushion
3.75
fabrication(0.5x$7.50/
DLH)
Assembly
3.75 (0.3x$7.50/DLH)
fabrication(0.5x$7.50/
DLH)
Mfg.
Overhead
19.20 (0.8x$12.80/DLH)
(1.5DLH
x
$12.80/DLH)
Total standard cost
$45.00
Selling price (30%
$58.50
markup)
*Attaching seats to frames and attaching rubber feet
Economy
Office Stool
$ 9.76
6.00
3.75
2.25
10.24
$32.00
$41.60
Office Division
Manufacturing Overhead Budget
Overhead Item
Supplies
Indirect labor
Supervision
Power
Heat and light
Nature
Amount
Variable – at current market prices
$420,000
Variable
375,000
Nonvariable
250,000
Use varies with activity; rates are fixed
180,000
Nonvariable – light is fixed regardless of production
140,000
while heat/air-conditioning varies with fuel
charges
Property taxes and
Nonvariable – any change in amounts/rates is
200,000
insurance taxes
independent of production
Depreciation
Fixed dollar total
1,700,000
Employment benefits 20% of supervision, direct and indirect labor
575,000
Total overhead
$3,840,000
Capacity in DLH
300,000
Overhead rate/DLH
$12.80
270
. What amount of employee benefits is associated with direct labor costs? (M)
a. $675,000
c. $450,000
b. $75,000
d. $500,000
271
. What is the variable manufacturing overhead rate? (M)
a. $7.80/hr.
c. $5.17/hr.
b. $11.25/hr.
d. $5.00/hr.
272
. What is the transfer price per 100-unit lot based on variable manufacturing costs to produce the modified cushioned
seat? (M)
a. $1,329
c. $789
b. $1,869
d. $1,986
273
. What is the fixed manufacturing overhead rate? (M)
a. $7.80/hr.
c. $5.17/hr.
b. $11.25/hr.
d. $5.00/hr.
274
. How many economy office stools can be produced with the labor hours currently used to make 100 deluxe stools?
(M)
a. 80.
c. 100.
b. 125.
d. 150.
275
. When computing the opportunity cost for the deluxe office stool, what is the contribution margin per unit produced?
(M)
a. $25.20
c. $13.56
b. $15.84
d. $33.30
276
. What is the opportunity cost of the Office Division if 125 economy stools can be made in the time required for 100
deluxe stools?
a. $789
c. $1,329
b. $1,869
d. $540
Questions 48 through 51 are based on the following information
The following information is provided for the IHM Co. for June 2001.
Actual
Standard
1,800 units
5 DLHs per unit @ $10.00 per DLH
8,900 DLHs @ $10.50 per DLH
VOH rate per DLH $ .75
Variable OH $6,400
FOH rate per DLH $1.90
Fixed OH $17,500
Budgeted FOH $16,910
48. What is the price variance?
a. $4,450 F
b. $4,450 U
c. $1,000 F
d. $1,000 U
49. What is the efficiency variance?
a. $4,450 F
b. $4,450 U
c. $1,000 F
d. $1,000 U
50. What is the spending variance?
a. $590 U
b. $590 F
c. $190 F
d. $190 U
51. What is the volume variance?
a. $590 U
b. $590 F
c. $190 F
d. $190 U
Barfields
277
. Toimi Inc. had the following variances for the most recent month:
Materials Price Variance
Materials Usage Variance
Direct Labor Rate Variance
$3,500 U
$ 720 F
$5,770 F
Direct Labor Efficiency Variance
$6,980 U
Other information included: actual wages paid $72,310; materials purchased $130,760; standards per unit were 2
labor hours at $5 per hour, 3 pounds at $6 per pound. There were no changes in materials inventories.
Required:
a. Find the units produced.
b. Find the standard labor hours.
c. Find the actual labor hours.
d. Find the standard quantity of materials allowed.
e. Find the actual quantity of materials used.
278
D, L & H 9e
. Ralph Inc. had the following variances for the most recent month:
Direct Labor Rate Variance
$14,560 U
Direct Labor Efficiency Variance
$ 3,660 U
Variable Overhead Spending Variance
$12,320 F
Other information included: actual wages paid $105,560; materials purchased $124,860; standards per unit were 2
labor hours at $5 per hour and variable overhead at $6 per hour.
Required:
a. Find the units produced.
b. Find the standard labor hours.
c. Find the actual labor hours.
d. Find the variable overhead efficiency variance.
e.
Find the actual variable overhead.
D, L & H 9e
279
. Gagne Company uses the following equation to budget manufacturing overhead.
Manufacturing overhead = $600,000 + $2 per direct labor hour
Gagne has budgeted 300,000 direct labor hours for the year. Actual results were 320,000 direct labor hours and
$1,249,000 total manufacturing overhead.
Required:
D, L & H 9e
a. Find the predetermined overhead rate.
b. Find total overhead applied for the year.
c. Compute (overapplied underapplied) overhead and circle the correct direction.
d. Find the overhead budget variance and state whether favorable or unfavorable.
e. Compute the volume variance and state whether favorable or unfavorable
280
. Bruno Company uses the following equation to budget manufacturing overhead.
Manufacturing overhead = $200,000 + $3 per direct labor hour
Bruno has budgeted 100,000 direct labor hours for the year. Actual results were 90,000 direct labor hours and
$457,000 total manufacturing overhead.
Required:
D, L & H 9e
a. Find the predetermined overhead rate.
b. Find total overhead applied for the year.
c. Compute (overapplied underapplied) overhead and circle the correct direction.
d. Find the overhead budget variance and state whether favorable or unfavorable.
e. Compute the volume variance and state whether favorable or unfavorable
281
. Tracton Corporation uses a standard costing system in which manufacturing overhead costs are applied to products
on the basis of machine time.
REQUIRED: (D)
N&G
a. Several numbers and labels have been omitted from the analysis of fixed overhead below. Supply the missing
numbers and labels.
?
$ __?____
Flexible Budget Fixed
Overhead Cost
$ __?____
Fixed Overhead Cost
Applied to Work in
Process
302,100 MH x $1.08
$ __?____
Budget Variance,
$1,880 U
?
$ __?____
Total variance, $388 F
b. Suppose that 6 minutes of machine time is standard per unit of production. How many units were actually
produced in the situation above?
c. Again suppose that 6 minutes of machine time is standard per unit of production. How many units of production
were assumed when the predetermined application rate for fixed overhead was established?
.. You have just been hired as the controller of the Eastern Division of Global Manufacturing. Performance records for
last year are incomplete, with only the following data available:
Variable overhead rate
$3.00 per direct labor-hour
Budgeted fixed overhead
$84,800
Total actual overhead cost
$262,500
Fixed overhead budget variance
$7,200 unfavorable
Variable overhead efficiency variance
$15,000 unfavorable
Actual direct labor-hours worked
55,000 direct labor-hours
Denominator activity level
53,000 direct labor-hours
Standard hours per unit
2 direct labor-hours
282
REQUIRED: (D)
N&G
Prepare a complete analysis of manufacturing overhead for the past year. Indicate actual, standard, and
denominator activity levels; variable overhead spending and efficiency variances; and fixed overhead budget and
volume variances.
FLEXIBLE BUDGET
283
. Bay City estimates production overhead costs equal to $200,000 + $4X + $7Y, where X is the number of direct labor
hours used and Y is the number of machine hours used. Bay City budgeted 20,000 direct labor hours and 50,000
machine hours for 20X2. Bay City produced 30,000 units in 20X2, each requiring 1 direct labor hour and 2.5
machine hours. Actual production costs were $890,000.
Required:
D, L & H 9e
a. Calculate the flexible budget allowance for production overhead costs for 20X2.
b. Find the amount and direction of the budget variance for 20X2 for production overhead. (favorable
unfavorable) Circle one answer.
284
. Westrum estimates production overhead costs equal to $300,000 + $2X, where X is the number of machine hours
used. Westrum budgeted 40,000 machine hours for 20X4. Westrum produced 23,000 units in 20X4, each requiring
3 machine hours. Actual production costs were $420,000.
Required:
D, L & H 9e
a. Calculate the flexible budget allowance for production overhead costs for 20X4.
b. Find the amount and direction of the budget variance for 20X4 for production overhead. (favorable
unfavorable) Circle one answer.
1
. REQUIRED: The overapplied factory O/H for the period.
DISCUSSION: (C) Nil Co. applies factory O/H using a predetermined O/H rate, based on direct labor cost. O/H
was budgeted for $600,000 based on a budgeted labor cost of $300,000 ($6 x 50,000 hrs.) Thus, $2 of O/H was
applied for each $1 of labor. Given actual labor cost of $325,000, $650,000 (2 x $325,000) was applied during the
period. Actual O/H was $620,000, so $30,000 ($650,000 – $620,000) was over-applied.
Answer (A) is incorrect because $20,000 is the difference between budgeted and actual factory O/H. Answer (B) is
incorrect because $25,000 is the difference between budgeted direct labor costs and actual direct labor costs.
Answer (D) is incorrect because $50,000 is the difference between the applied O/H and the budgeted amount.
2
. Answer (A) is correct. Overhead was budgeted at $756,000 based on a budgeted labor cost of $432,000 ($7.20
x 60,000 hours). Thus, $1.75 of overhead was applied for each $1 of labor cost. Given actual labor costs of
$450,000, $787,500 ($1.75 x $450,000) of overhead was applied during the period. Actual overhead was $775,000,
so $12,500 ($787,500 - $775,000) was overapplied. Answer (B) is incorrect because $18,000 is the difference
between budgeted direct labor cost at 60,000 direct labor hours and actual direct labor cost ($450,000 - $432,000).
Answer (C) is incorrect because $19,000 is the difference between budgeted overhead ($756,000) and the actual
overhead ($775,000). Answer (D) is incorrect because $37,000 is the sum of the difference between budgeted
overhead ($756,000) and the actual overhead ($775,000) and the difference between the applied overhead
($787,500) and the budgeted overhead ($756,000).
3.
Applied overhead ($9 x 30,000)
$270,000
Actual overhead
240,000
Overapplied overhead
$ 30,000
4
. Answer (D) is correct. The volume variance (VV) arises from the difference between budgeted fixed O/H and
the fixed O/H applied at the standard rate based on the standard input allowed for actual output. The O/H rate is $15
per machine hour ($480,000 ÷ 32,000).
VV
=
Budgeted Fixed O/H - Applied Fixed O/H
$6,360
=
$480,000 - ($15 x AH)
$15 x AH
=
$480,000 - $6,360
AH
=
$473,640 ÷ $15
AH
=
31,576.
Answer (A) is incorrect because 32,425 assumes the volume variable was favorable. Answer (B) is incorrect
because the actual machine hours can be found by using the following equation: Volume Variance = Budgeted
Fixed O/H - Applied Fixed O/H. The applied fixed O/H is equal to the O/H rate multiplied by the actual hours. The
O/H rate is found by dividing the budgeted O/H ($480,000) by the budgeted hours (32,000). Actual machine hours
are 31,576. Answer (C) is incorrect because 32,000 equals the budgeted machine hours.
5
.
[(11,250 / 225) x 5.25 x $40] – [(11,250 / 250) x 5 x $40] = $1,500 (U)
6
.
(11,250 / 225) x 5.25 x ($38 - $40) = $525 (F)
7
.
$1,500 (U) + $525 (F) = $975 (U)
8
.
$14,000 - $14,400 = $400 (U)
9
. Normal setup hours = (15,000 / 250) x 5 = 300 hours
OH rate = $14,400 / 300 = $48 per setup hour
$14,400 – [(11,250 / 250) x 5 x $48] = $3,600 (U)
10 .
(92,000 units x $10) - (90,000 units x $10) = $20,000 F
11
$450,800 - $432,000 = $18,800 U
.
12.
Actual Results
Static Budget
Static-budget Variance
Units sold
92,000
90,000
Revenues
$920,000
$900,000
$20,000 F
Variable costs
450,800
432,000
18,800 U
Contribution margin
$469,200
$468,000
$1,200 F
Fixed costs
95,000
100,000
(5,000) F
Operating income
$374,200
$368,000
$6,200 F
13 .
(495,000 units x $10) - (500,000 units x $10) = $50,000 U
14 .
$1,250,000 - $1,500,000= $250,000 F
15.
Actual Results
Static Budget
Static-budget Variance
Units sold
495,000
500,000
Revenues
$4,950,000
$5,000,000
$(50,000) U
Variable costs
1,250,000
1,500,000
(250,000) F
Contribution margin
$3,700,000
$3,500,000
$200,000 F
Fixed costs
925,000
900,000
25,000 U
Operating income
$2,775,000
$2,600,000
$175,000 F
16.
10,000 units
20,000 units
Materials ($0.60)
$ 6,000
$12,000
Machinery
9,000
9,000
$15,000
$21,000
17.
10,000 units
20,000 units
Materials ($1.50)
$15,000
$30,000
Machinery
23,000
23,000
$38,000
$53,000
18 .
Answer (D) is correct. If the design phase is 60% complete, the costs that should have been incurred equal
$1,800,000 (60% x $3,000,000). Consequently, the overrun is $700,000 (2,500,000 - $1,800,000).
Answer (A) is incorrect because the design phase has incurred an overrun. Answer (B) is incorrect because
$500,000 is the excess of budgeted cost over actual cost incurred to date. Answer (C) is incorrect because the
design phase has incurred an overrun.
19 .
Answer (C) is correct. The company planned to produce 100,000 units at $6 each ($4 variable + $2 fixed cost),
or a total of $600,000, consisting of $400,000 of variable costs and $200,000 of fixed costs. Total production was
only 80,000 units at a total cost of $515,000. The flexible budget for a production level of 80,000 units includes
variable costs of $320,000 ($4 x 80,000 units). Fixed costs would remain at $200,000. Thus, the total flexible budget
costs are $520,000. Given that actual costs were only $515,000, the variance is $5,000 favorable.
Answer (A) is incorrect because $85,000 favorable is based on a production level of 100,000 units. Answer (B) is
incorrect because the variance is favorable. Answer (D) is incorrect because the variance is favorable.
20 .
REQUIRED: The flexible-budget operating income.
DISCUSSION: (D) A flexible budget is formulated for several different activity levels. Assuming that unit sales price
($100,000 ÷ 10,000 units = $10), variable costs of sales ($60,000 ÷ 10,000 units = $6), and total fixed costs
($30,000) do not change, a flexible budget may be prepared for the actual sales level (12,000 units). Hence, the
budgeted contribution margin (sales – variable cost of sales) equals $48,000 [(12,000 units x $10) – (12,000 units x
$6)]. The operating income is therefore $18,000 ($48,000 CM - $30,000 FC).
Answer (A) is incorrect because $12,000 assumes that all costs are variable. Answer (B) is incorrect because
$19,200 is based on actual variable costs. Answer (C) is incorrect because $30,000 is based on actual sales
revenue.
21 . REQUIRED: The true statement about the actual results.
DISCUSSION: (C) The sales volume variance is the change in contribution margin caused by the difference
between the actual and budgeted unit volume. It equals the budgeted unit contribution margin times the difference
between actual and expected volume, or $8,000 [($10 - $6) x (12,000 – 10,000)]. The sales volume variance is
favorable because actual sales exceeded budgeted sales.
Answer (A) is incorrect because the flexible budget variance for actual results is $11,200 favorable ($29,200 actual
operating income - $18,000 flexible budget operating income). Answer (B) is incorrect because the sales price
variance is $12,000 [$132,000 actual sales - $10 x 12,000 units sold)]. Answer (D) is incorrect because the fixed
cost budget variance is $2,000 unfavorable ($32,000 actual - $30,000 budgeted).
22 .
20,000 units ($600,000/25,000) = $480,000
23 .
$450,000, given in the static budget
24 .
$512,000 - (20,000 x $600,000/25,000) = $32,000 U
25 .
Answer (D) is correct. Each unit of finished product contains 2 yards of direct material. However, the problem
states that the 20% direct material spoilage is calculated on the quantity of direct material input. Although, not
mentioned, the facts on this question infer that the spoilage is normal and should be part of the product’s standard
cost. The solutions approach would be to setup the following formula:
Input quantity – Spoilage = Output amount
X – .2X = 2 yards
.8X = 2 yards
x = 2.5 yards
Thus, the standard direct material cost per unit of finished product is $7.50 (2.5 yards x $3).
26 .
Answer (D) is correct. If 1.5 yards remain in each unit after spoilage of 25% of the direct materials input, the
total per unit input must have been 2 yards (1.5 ÷ 75%). The standard unit direct materials cost is therefore $4.00 (2
yards x $2).
Answer (A) is incorrect because the 1.5 yards of good output should be divided (not multiplied) by 75% to determine
the standard yards of material per unit. Answer (B) is incorrect because $3.00 is the cost per unit excluding
spoilage. Answer (C) is incorrect because $3.75 is found by adding 25% of the materials of the finished product as
spoilage and then multiplying by the $2.00 cost per yard [(1.5 x 1.25) x $2].
27 . Answer (C) is correct. The materials purchase price variance equals the quantity purchased multiplied by the
difference between the actual price and the standard price, or $135 unfavorable [($.75 - $.72) x 4,500 lbs.]. The
variance is unfavorable when the actual price exceeds the standard price.
Answer (A) is incorrect because $117 unfavorable is based on the standard input for 1,300 units. Answer (B) is
incorrect because $123 unfavorable is based on the actual quantity used. Answer (D) is incorrect because $150
unfavorable is based on the assumption that 5,000 lbs. were purchased.
28 . Variable standard cost per unit
Direct materials (15 pounds x $16)
$240
Direct labor (4 hours x $24)
96
Variable overhead (4 hours x $14)
56
$392
29 .
30 .
$170,000 – (10,000 x $16) = $10,000 unfavorable
REQUIREMENT: To determine Lem’s material price variance for May.
Answer (B) is correct. The direct materials price variance is the difference between actual unit prices and standard
unit prices multiplied by the actual quantity, as shown below.
AQ x AP – AQ x SP = Materials price variance
$10,080 – (4,200m x $2.50.) = $420F
The $420 price variance is favorable because the actual purchase price of the material was lower than the standard
price. Since the material was purchased for only $2,40 per meter ($10,080 cost
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