Chapter 10
Standard Costs and the Balanced Scorecard
True/False
1.
F
Easy
Standard costs should generally be based on the actual costs of prior periods.
2.
F
Easy
The standard direct labor rate should not include fringe benefits.
3.
F
Medium
From a standpoint of cost control, the most effective time to recognize material price variances is when the
materials are placed into production.
4.
F
Medium
The material quantity variance is computed based on the quantity of all materials purchased during the
period.
5.
F
Medium
Purchase of poor quality materials will generally result in a favorable materials price variance and an
unfavorable labor rate variance.
6.
T
Easy
A balanced scorecard is an integrated set of performance measures that support management's strategy
throughout the organization.
7.
F
Medium
The performance measures on a balanced scorecard tend to fall into four groups: financial measures,
customer measures, internal business process measures, and external business process measures.
8.
T
Easy
The emphasis in the balanced scorecard is on improvement rather than meeting a preset standard.
9.
F
Medium
A balanced scorecard should contain every performance measure that can be expected to influence a
company's profits.
10.
T
Easy
Process Time is the only value-added component of Throughput Time.
358Managerial Accounting, 9/e
11.
T
Medium
(Appendix) A favorable labor efficiency variance would result in a credit balance in the labor efficiency
variance account.
12.
T
Easy
Management by exception means that a manager's attention is directed toward those parts of the
organization where things are not proceeding according to plans.
13.
T
Easy
The production manager is usually held responsible for the labor efficiency variance.
14.
T
Easy
Quantity standards indicate how much of an input should be used for manufacturing a unit of product or in
providing a unit of service.
15.
F
Easy
All cost variances should be considered exceptions that require the attention of management.
Multiple Choice
16.
C
Easy
The standards that allow for no machine breakdowns or other work interruptions and that require peak
efficiency at all times are referred to as:
a. normal standards.
b. practical standards.
c. ideal standards.
d. budgeted standards.
17.
C
Medium
CPA adapted
To measure controllable production inefficiencies, which of the following is the best basis for a company to
use in establishing the standard hours allowed for the output of one unit of product?
a. Average historical performance for the last several years.
b. Engineering estimates based on ideal performance.
c. Engineering estimates based on attainable performance.
d. The hours per unit that would be required for the present workforce to satisfy expected demand over
the long run.
18.
C
Easy
CMA adapted
Which of the following statements concerning practical standards is incorrect?
a. Practical standards can be used for product costing and cash
budgeting.
b. Practical standards can be attained by the average worker.
c. When practical standards are used, there is no reason to adjust standards if an old machine is replaced by
a newer, faster machine.
d. Under practical standards, large variances are less likely than under ideal standards.
19.
B
Easy
CPA adapted
If a company follows a practice of isolating variances at the earliest point in time, what would be the
appropriate time to isolate and recognize a direct material price variance?
a. When material is issued.
b. When material is purchased.
c. When material is used in production.
d. When production is completed.
20.
C
Medium
CPA adapted
An unfavorable labor efficiency variance indicates that:
a. The actual labor rate was higher than the standard labor rate.
b. The labor rate variance must also be unfavorable.
c. Actual labor hours worked exceeded standard labor hours for the production level achieved.
d. Overtime labor was used during the period.
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359
21.
D
Easy
A favorable labor rate variance indicates that
a. actual hours exceed standard hours.
b. standard hours exceed actual hours.
c. the actual rate exceeds the standard rate.
d. the standard rate exceeds the actual rate.
22.
B
Hard
CPA adapted
(Appendix) What does a credit balance in a direct labor efficiency variance account indicate?
a. the average wage rate paid to direct labor employees was less
than the standard rate.
b. the standard hours allowed for the units produced were greater than actual direct labor hours used.
c. actual total direct labor costs incurred were less than
standard direct labor costs allowed for the units
produced.
d. the number of units produced was less than the number of
units budgeted for the period.
23.
C
Easy
If the actual labor hours worked exceed the standard labor hours allowed, what type of variance will occur?
a. Favorable labor efficiency variance.
b. Favorable labor rate variance.
c. Unfavorable labor efficiency variance.
d. Unfavorable labor rate variance.
360Managerial Accounting, 9/e
24.
A
Medium
CPA adapted
Which of the following is the most probable reason a company would experience an unfavorable labor rate
variance and a favorable labor efficiency variance?
a. The mix of workers assigned to the particular job was heavily
weighted towards the use of higher
paid, experienced individuals.
b. The mix of workers assigned to the particular job was heavily
weighted towards the use of new
relatively low paid, unskilled workers.
c. Because of the production schedule, workers from other production areas were assigned to assist this
particular
process.
d. Defective materials caused more labor to be used in order to
produce a standard unit.
25.
D
Easy
CPA adapted
Which department is usually held responsible for an unfavorable materials quantity variance?
a. Marketing
b. Purchasing
c. Engineering
d. Production
26.
B
Easy
CMA adapted
A favorable material price variance coupled with an unfavorable material usage variance would MOST
likely result from:
a. problems with processing machines.
b. the purchase of low quality materials.
c. problems with labor efficiency.
d. changes in the product mix.
27.
C
Medium
CMA adapted
Tower Company planned to produce 3,000 units of its single product, Titactium, during November. The
standards for one unit of Titactium specify six pounds of materials at P0.30 per pound. Actual production in
November was 3,100 units of Titactium. There was a favorable materials price variance of P380 and an
unfavorable materials quantity variance of P120. Based on these variances, one could conclude that:
a. more materials were purchased than were used.
b. more materials were used than were purchased.
c. the actual cost per pound for materials was less than the standard cost per pound.
d. the actual usage of materials was less than the standard allowed.
28.
B
Medium
A labor efficiency variance resulting from the use of poor quality materials should be charged to:
a. the production manager.
b. the purchasing agent.
c. manufacturing overhead.
d. the engineering department.
29.
D
Easy
Which of the following represents value-added time in the manufacturing cycle?
a. Inspection time.
b. Queue time.
c. Move time.
d. Process time.
30.
D
Medium
Throughput time consists of:
a. Process time.
b. Inspection time and move time.
c. Process time, inspection time, and move time.
d. Process time, inspection time, move time, and queue time.
31.
C
Easy
Manufacturing Cycle Efficiency (MCE) is computed as:
a. Throughput Time ÷ Delivery Cycle Time
b. Process Time ÷ Delivery Cycle Time
c. Value-Added Time ÷ Throughput Time
d. Value-Added Time ÷ Delivery-Cycle Time
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32.
D
Medium
(Appendix) Drake Company purchased materials on account. The entry to record the purchase of materials
having a standard cost of P1.50 per pound from a supplier at P1.60 per pound would include a:
a. credit to Raw Materials Inventory.
b. debit to Work in Process.
c. credit to Materials Price Variance.
d. debit to Materials Price Variance.
33.
A
Medium
(Appendix) Which of the following entries would correctly record the charging of direct labor costs to Work
in Process given an unfavorable labor efficiency variance and a favorable labor rate variance?
a. Work in Process
Labor Efficiency Variance
Labor Rate Variance
Wages Payable
b. Work in Process
Wages Payable
c. Work in Process
Labor Efficiency Variance
Labor Rate Variance
Wages Payable
d. Work in Process
Labor Rate Variance
Labor Efficiency Variance
Wages Payable
362Managerial Accounting, 9/e
34.
C
Easy
CMA adapted
Under a standard cost system, the material price variances are usually the responsibility of the:
a. production manager.
b. sales manager.
c. purchasing manager.
d. engineering manager.
35.
C
Medium
The terms "standard quantity allowed" or "standard hours allowed" mean:
a. the actual output in units multiplied by the standard output
allowed.
b. the actual input in units multiplied by the standard output
allowed.
c. the actual output in units multiplied by the standard input
allowed.
d. the standard output in units multiplied by the standard input
allowed.
36.
D
Medium
CPA adapted
Dahl Company, a clothing manufacturer, uses a standard costing system. Each unit of a finished product
contains 2 yards of cloth. However, there is unavoidable waste of 20%, calculated on input quantities, when
the cloth is cut for assembly. The cost of the cloth is P3 per yard. The standard direct material cost for cloth
per unit of finished product is:
a. P4.80.
b. P6.00.
c. P7.00.
d. P7.50.
37.
C
Hard
Cox Company's direct material costs for the month of January were as follows:
Actual quantity purchased ............. 18,000 kilograms
Actual unit purchase price ............ P 3.60 per kilogram
Materials price variance-unfavorable (based on purchases) .... P 3,600
Standard quantity allowed
for actual production ............... 16,000 kilograms
Actual quantity used .................. 15,000 kilograms
For January there was a favorable direct material quantity variance of:
a. P3,360.
b. P3,375.
c. P3,400.
d. P3,800.
38.
C
Hard
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 P53,000; the materials quantity variance was P1,875 Unfavorable; and
the standard quantity of materials allowed for July production was 21,750 pounds. The materials price
variance for July was:
a. P2,725 F.
b. P2,725 U.
c. P3,250 F.
d. P3,250 U.
39.
C
Medium
CPA adapted
Information on Fleming Company's direct material costs follows:
Actual amount of direct materials used ...... 20,000 pounds
Actual direct material costs ................ P40,000
Standard price of direct materials .......... P2.10 per pound
Direct material efficiency variance--favorable P3,000
What was the company's direct material price variance?
a. P1,000 favorable.
b. P1,000 unfavorable.
c. P2,000 favorable.
d. P2,000 unfavorable.
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40.
C
Easy
Last month 75,000 pounds of direct material were purchased and 71,000 pounds were used. If the actual
purchase price per pound was P0.50 more than the standard purchase price per pound, then the material
price variance was:
a. P2,000 F.
b. P37,500 F.
c. P37,500 U.
d. P35,500 U.
41.
A
Medium
CPA adapted
During March, Younger Company's direct material costs for product T were as follows:
Actual unit purchase price ............... P6.50 per meter
Standard quantity allowed for actual
production ............................. 2,100 meters
Quantity purchased and used for actual
production ............................. 2,300 meters
Standard unit price ...................... P6.25 per meter
Younger's material quantity variance for March was:
a. P1,250 unfavorable.
b. P1,250 favorable.
c. P1,300 unfavorable.
d. P1,300 favorable.
364Managerial Accounting, 9/e
42.
B
Easy
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
1.7 meters
Standard price ........................ P19.80 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 .... P113,680
Actual materials used in production ... 5,100 meters
Actual output ......................... 3,200 units
What is the materials quantity variance for the month?
a. P13,720 U
b. P6,732 F
c. P13,860 U
d. P6,664 F
43.
A
Easy
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
8.3 grams
Standard price ........................ P19.15 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 .... P141,375
Actual materials used in production ... 7,100 grams
Actual output .........................
700 units
What is the materials price variance for the month?
a. P2,250 F
b. P7,540 U
c. P24,317 U
d. P7,660 U
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44.
C
Hard
CPA adapted
Information on Kennedy Company's direct material costs follows:
Standard price per pound of raw materials ....... P3.60
Actual quantity of raw materials purchased ...... 1,600 pounds
Standard quantity allowed for actual production.. 1,450 pounds
Materials purchase price variance--favorable .... P 240
What was the actual purchase price per unit, rounded to the nearest penny?
a. P3.06.
b. P3.11.
c. P3.45.
d. P3.75.
45.
B
Hard
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 ......... P2 per pound
Material quantity variance ................. P1,000 favorable
The standard quantity of material allowed for October production is:
a. 23,000 lbs.
b. 24,000 lbs.
c. 24,500 lbs.
d. 25,000 lbs.
46.
B
Easy
CPA adapted
Yola Company manufactures a product with standards for direct labor of 4 direct labor-hours per unit at a
cost of P12.00 per direct labor-hour. During June, 1,000 units were produced using 4,100 hours at P12.20
per hour. The direct labor efficiency variance was:
a. P1,200 favorable.
b. P1,200 unfavorable.
c. P2,020 favorable.
d. P2,020 unfavorable.
47.
D
Easy
The following labor standards have been established for a particular product:
Standard labor hours per unit of output ..
8.3 hours
Standard labor rate ...................... P12.10 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 .................. P71,370
Actual output ............................
900 units
What is the labor efficiency variance for the month?
a. P19,017 F
b. P19,017 U
c. P16,029 F
d. P16,577 F
366Managerial Accounting, 9/e
48.
A
Easy
The following labor standards have been established for a particular product:
Standard labor hours per unit of output ..
1.7 hours
Standard labor rate ...................... P14.05 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 .................. P50,690
Actual output ............................ 2,300 units
What is the labor rate variance for the month?
a. P1,295 F
b. P2,877 F
c. P4,246 F
d. P4,246 U
49.
D
Hard
CPA adapted
Lab Corp. uses a standard cost system. Direct labor information for Product CER for the month of October
follows:
Standard direct labor rate ................. P6.00 per hour
Actual direct labor rate paid .............. P6.10 per hour
Standard hours allowed for actual production 1,500 hours
Labor efficiency variance--unfavorable ..... P600
What are the actual hours worked?
a. 1,400.
b. 1,402.
c. 1,598.
d. 1,600.
50.
D
Hard
The standards for direct labor for a product are 2.5 hours at P8 per hour. Last month, 9,000 units of the
product were made and the labor efficiency variance was P8,000 F. The actual number of hours worked
during the past period was:
a. 23,500.
b. 22,500.
c. 20,500.
d. 21,500.
51.
C
Hard
In a certain standard costing system the following results occurred last period: labor rate variance, P1,000
U; labor efficiency variance, P2,800 F; and the actual labor rate was P0.20 more per hour than the standard
labor rate. The number of actual direct labor hours used last period was:
a. 9,000.
b. 5,400.
c. 5,000.
d. 4,800.
52.
A
Hard
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 ......... P9 per hour
Labor rate variance ................ P1,160 favorable
The actual direct labor rate for November is:
a. P8.80.
b. P8.90.
c. P9.00.
d. P9.20.
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53.
A
Hard
CPA adapted
For the month of April, Thorp Co.'s records disclosed the following data relating to direct labor:
Actual cost ............... P10,000
Rate variance ............. P 1,000 favorable
Efficiency variance ....... P 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:
a. P5.50.
b. P5.00.
c. P4.75.
d. P4.50.
54.
B
Hard
Borden Enterprises uses standard costing. For the month of April, the company reported the following data:
• Standard direct labor rate: P10 per hour
• Standard hours allowed for actual production: 8,000
• Actual direct labor rate: P9.50 per hour
• Labor efficiency variance: P4,800 F
The labor rate variance for April is:
a. P3,760 U.
b. P3,760 F.
c. P2,850 F.
d. P2,850 U.
55.
B
Easy
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 ........ P12.55 per hour
The following data pertain to operations for the last month:
Actual hours ........................... 2,900 hours
Actual total variable overhead cost .... P36,975
Actual output ..........................
200 units
What is the variable overhead efficiency variance for the month?
a. P17,397 U
b. P16,817 U
c. P312 F
d. P17,085 U
56.
B
Easy
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 ........ P12.00 per hour
The following data pertain to operations for the last month:
Actual hours ........................... 2,600 hours
Actual total variable overhead cost .... P31,330
Actual output ..........................
400 units
What is the variable overhead spending variance for the month?
a. P112 F
b. P130 U
c. P4,450 U
d. P4,338 U
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369
Reference: 10-1
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 Standard Standard
Quantity Price
Cost
Direct materials .... 6 pounds P 3.50/pound P21.00
Direct labor ........ 1.3 hours P11.00/hour 14.30
P35.30
During March, Bryan purchased 165,000 pounds of direct material at a total cost of P585,750. The total factory wages for March
were P400,000, 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.
B
Medium
Refer To: 10-1
The price variance for the direct material acquired by the company during March is:
a. P7,550 favorable.
b. P8,250 unfavorable.
c. P7,550 unfavorable.
d. P8,250 favorable.
58.
A
Medium
Refer To: 10-1
The direct material quantity variance for March is:
a. P3,500 unfavorable.
b. P3,550 favorable.
c. P3,500 favorable.
d. P3,550 unfavorable.
59.
C
Medium
Refer To: 10-1
The direct labor rate variance for March is:
a. P 8,000 favorable.
b. P48,000 unfavorable.
c. P 8,000 unfavorable.
d. P48,000 favorable.
60.
B
Medium
Refer To: 10-1
The direct labor efficiency variance for March is:
a. P5,625 unfavorable.
b. P5,500 favorable.
c. P5,625 favorable.
d. P5,500 unfavorable.
370Managerial Accounting, 9/e
Reference: 10-2
The Litton Company has established standards as follows:
Direct material
3 lbs. @ P4/lb. = P12 per unit
Direct labor
2 hrs. @ P8/hr. = P16 per unit
Variable manuf. overhead 2 hrs. @ P5/hr. = P10 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.)
P11,400
Direct labor cost (1,100 hrs.)
P 9,240
Variable manuf. overhead cost incurred
P 5,720
The company applies variable manufacturing overhead to products on the basis of direct labor hours.
61.
C
Easy
Refer To:
10-2
The materials price variance is:
a. P400 U.
b. P400 F.
c. P600 F.
d. P600 U.
62.
A
Easy
Refer To: 10-2
The materials quantity variance is:
a. P800 U.
b. P4,000 U.
c. P760 U.
d. P760 F.
63.
D
Easy
Refer To: 10-2
The labor rate variance is:
a. P480 F.
b. P480 U.
c. P440 F.
d. P440 U.
64.
A
Easy
Refer To: 10-2
The labor efficiency variance is:
a. P800 F.
b. P800 U.
c. P840 F.
d. P840 U.
65.
B
Easy
Refer To: 10-2
The variable overhead spending variance is:
a. P240 U.
b. P220 U.
c. P220 F.
d. P240 F.
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66.
D
Easy
Refer To: 10-2
The variable overhead efficiency variance is:
a. P520 F.
b. P520 U.
c. P500 U.
d. P500 F.
Reference: 10-3
The Albright Company uses standard costing and has established the following standards for its single product:
Direct materials .......... 2 gallons at P3 per gallon
Direct labor .............. 0.5 hours at P8 per hour
Variable manuf. overhead .. 0.5 hours at P2 per hour
During November, the company made 4,000 units and incurred the following costs:
Direct materials purchased ........ 8,100 gallons at P3.10 per gallon
Direct materials used ............. 7,600 gallons
Direct labor used ................. 2,200 hours at P8.25 per hour
Actual variable manuf. overhead ... P4,175
The company applies variable manufacturing overhead to products on the basis of direct labor hours.
67.
C
Easy
Refer To: 10-3
The material price variance for November was:
a. P2,310 U.
b. P2,310 F.
c. P810 U.
d. P810 F.
68.
B
Easy
Refer To: 10-3
The material quantity variance for November was:
a. P1,200 U.
b. P1,200 F.
c. P300 U.
d. P1,500 F.
69.
B
Easy
Refer To: 10-3
The labor rate variance for November was:
a. P1,050 U.
b. P550 U.
c. P2,150 U.
d. P2,150 F.
70.
D
Easy
Refer To: 10-3
The labor efficiency variance for November was:
a. P1,050 U.
b. P550 U.
c. P1,600 F.
d. P1,600 U.
71.
A
Medium
Refer To: 10-3
The total variable overhead variance for November was:
a. P175 U.
b. P225 F.
c. P225 U.
d. P400 U.
Reference: 10-4
Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of
Fastgro as follows:
Standard
Standard Quantity
Cost per Bag
Direct material ........... 20 pounds
P8.00
372Managerial Accounting, 9/e
Direct labor .............. 0.1 hours
Variable manuf. overhead .. 0.1 hours
1.10
.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 P32,300
• Direct labor worked: 390 hours at a cost of P4,875
• Variable manufacturing overhead incurred: P1,475
• Inventory of direct materials on Jan. 31: 3,000 pounds
72.
C
Medium
Refer To: 10-4
The materials price variance for January is:
a. P1,640 F.
b. P1,640 U.
c. P1,700 F.
d. P1,300 U.
73.
A
Medium
Refer To: 10-4
The materials quantity variance for January is:
a. P800 U.
b. P300 U.
c. P300 F.
d. P750 F.
74.
D
Medium
Refer To: 10-4
The labor rate variance for January is:
a. P475 F.
b. P475 U.
c. P585 F.
d. P585 U.
75.
D
Medium
Refer To: 10-4
The labor efficiency variance for January is:
a. P475 F.
b. P350 U.
c. P130 U.
d. P110 F.
76.
D
Medium
Refer To: 10-4
The total variance for variable overhead for January is:
a. P85 F.
b. P40 F.
c. P100 U.
d. P125 F.
Reference: 10-5
(Appendix) 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 Standard Cost
or Hours
per Mip
Direct materials .. 6 board feet
P9.00
Direct labor ...... 0.8 hours
P9.60
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 P24,000.
• Used 12,000 board feet to produce 2,100 Mips.
• Used 1,700 hours of direct labor time at a total cost of P20,060.
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77.
B
Medium
Refer To: 10-5
To record the purchase of direct materials, the general ledger would include what entry to the Materials
Price Variance Account?
a. P1,500 credit
b. P1,500 debit
c. P6,000 credit
d. P6,000 debit
78.
D
Medium
Refer To: 10-5
To record the use of direct materials in production, the general ledger would include what entry to the
Materials Quantity Variance account?
a. P3,600 debit
b. P3,600 credit.
c. P900 debit
d. P900 credit
79.
D
Medium
Refer To: 10-5
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?
a. P240 credit
b. P240 debit
c. P340 debit
d. P340 credit
374Managerial Accounting, 9/e
80.
B
Medium
Refer To: 10-5
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?
a. P480 credit
b. P240 debit
c. P1,200 debit
d. P1,200 credit
Reference: 10-6
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 P2.75 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 P7,140.
Labor: 2,500 hours worked at a total cost of P8,000.
81.
D
Easy
Refer To: 10-6
The materials price variance is:
a. P700 U.
b. P420 U.
c. P420 F.
d. P700 F.
82.
A
Easy
Refer To: 10-6
The materials quantity variance is:
a. P1,120 U.
b. P1,820 F.
c. P1,820 U.
d. P1,120 F.
83.
C
Easy
Refer To: 10-6
The labor rate variance is:
a. P2,500 F.
b. P1,125 F.
c. P1,125 U.
d. P2,500 U.
84.
B
Easy
Refer To: 10-6
The labor efficiency variance is:
a. P1,600 U.
b. P1,375 U.
c. P1,375 F.
d. P1,600 F.
Managerial Accounting, 9/e
375
Reference: 10-7
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
4.4 pounds
Standard price ........................ P13.20 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 .... P62,880
Actual materials used in production ... 4,300 pounds
Actual output .........................
700 units
85.
A
Easy
Refer To: 10-7
What is the materials price variance for the month?
a. P480 F
b. P430 F
c. P430 U
d. P480 U
86.
C
Easy
Refer To: 10-7
What is the materials quantity variance for the month?
a. P6,550 U
b. P15,982 U
c. P16,104 U
d. P6,600 U
Reference: 10-8
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
1.9 grams
Standard price ........................ P18.00 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 .... P108,460
Actual materials used in production ... 5,200 grams
Actual output ......................... 2,700 units
87.
A
Easy
Refer To: 10-8
What is the materials price variance for the month?
a. P4,060 U
b. P3,640 F
c. P3,640 U
d. P4,060 F
376Managerial Accounting, 9/e
88.
A
Easy
Refer To: 10-8
What is the materials quantity variance for the month?
a. P1,260 U
b. P1,309 U
c. P11,220 U
d. P10,800 U
Reference: 10-9
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
6.8 meters
Standard price ........................ P17.10 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 .... P156,600
Actual materials used in production ... 8,500 meters
Actual output ......................... 1,200 units
89.
D
Easy
Refer To: 10-9
90.
A
Easy
Refer To:
10-9
What is the materials price variance for the month?
a. P2,700 F
b. P2,550 U
c. P2,550 F
d. P2,700 U
What is the materials quantity variance for the month?
a. P5,814 U
b. P8,700 U
c. P5,916 U
d. P8,550 U
Reference: 10-10
The following labor standards have been established for a particular product:
Standard labor hours per unit of output ..
7.5 hours
Standard labor rate ...................... P15.25 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 .................. P144,480
Actual output ............................ 1,200 units
Managerial Accounting, 9/e
377
91.
A
Easy
Refer To: 10-10
92.
D
Easy
Refer To: 10-10
What is the labor rate variance for the month?
a. P1,920 F
b. P240 U
c. P1,920 U
d. P240 F
What is the labor efficiency variance for the month?
a. P7,230 U
b. P9,030 U
c. P7,230 F
d. P9,150 U
Reference: 10-11
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:.................................. P 7,000 F
Labor efficiency variance:............................ P12,000 F
Variable overhead efficiency variance:................ P 4,000 F
Number of units produced:............................. 10,000
Standard labor rate per direct labor hour:............ P12
Standard variable overhead rate per direct labor hour: P 4
Actual labor hours used:.............................. 14,000
Actual variable manufacturing overhead costs:......... P58,290
93.
B
Medium
Refer To: 10-11
94.
D
Hard
Refer To: 10-11
95.
B
Hard
Refer To: 10-11
96.
C
Hard
Refer To: 10-11
97.
C
Hard
Refer To: 10-11
The variable overhead spending variance for May was:
a. P2,290 F.
b. P2,290 U.
c. P1,710 F.
d. P1,710 U.
The actual direct labor rate for May in Pesos per hour was:
a. P12.50.
b. P12.00.
c. P11.75.
d. P11.50.
The total standard cost for direct labor for May was:
a. P168,000.
b. P180,000.
c. P120,000.
d. P161,000.
The total standard cost for variable overhead for May was:
a. P56,000.
b. P40,000.
c. P60,000.
d. P50,000.
The standard hours allowed to make one unit of finished product are:
a. 1.0.
b. 1.2.
c. 1.5.
d. 2.0.
Reference: 10-12
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 ........ P11.55 per hour
The following data pertain to operations for the last month:
Actual hours ........................... 4,900 hours
Actual total variable overhead cost .... P58,310
Actual output .......................... 3,000 units
378Managerial Accounting, 9/e
98.
C
Hard
Refer To: 1011
What is the variable overhead spending variance for the month?
a. P2,870 U
b. P2,870 F
c. P1,715 U
d. P1,715 F
99.
C
Easy
Refer To: 10-12
What is the variable overhead efficiency variance for the month?
a. P1,680 F
b. P1,190 U
c. P1,155 U
d. P1,190 F
Reference: 10-13
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: P48,700
• Total variable overhead variance: P300 F
• Standard hours allowed for actual production: 7,000
• Actual direct labor hours worked: 6,840
100.
C
Hard
Refer To: 10-13
The standard variable overhead rate per direct labor hour is:
a. P6.91.
b. P6.95.
c. P7.00.
d. P7.12.
Managerial Accounting, 9/e
379
101.
B
Hard
Refer To: 10-13
102.
C
Hard
Refer To: 10-13
The variable overhead spending variance is:
a. P820 F.
b. P820 U.
c. P740 F.
d. P740 U.
The variable overhead efficiency variance is:
a. P430 U.
b. P740 F.
c. P1,120 F.
d. P950 U.
Reference: 10-14
Ricric Corporation has provided the following data for one of its products:
Process time ........ 3 days
Queue time .......... 4 days
Inspection time ..... 0.7 days
Move time ........... 0.3 days
Wait time ........... 9 days
103.
A
Easy
Refer To: 10-14
104.
B
Easy
Refer To: 10-14
105.
A
Medium
Refer To: 10-14
The throughput time for this operation would be:
a. 8 days.
b. 3 days.
c. 17 days.
d. 7.7 days.
The delivery cycle time for this operation would be:
a. 8 days.
b. 17 days.
c. 9.3 days.
d. 7.7 days.
The manufacturing cycle efficiency for this operation would be closest to:
a. 0.375.
b. 0.45.
c. 0.18.
d. 0.33.
380Managerial Accounting, 9/e
Essay
106.
Hard
(Appendix) Albert Manufacturing Company manufactures a single product. The standard cost of one unit of
this product is:
Direct materials: 6 feet at P1.50 ........... P 9.00
Direct labor: 1 hour at P6.75 ............... 6.75
Variable overhead: 1 hour at P4.50 .......... 4.50
Total standard variable cost per unit ....... P20.25
During the month of October, 6,000 units were produced. Selected cost data relating to the month's
production follow:
Material purchased: 60,000 feet at P1.43 .... P85,800
Material used in production: 38,000 feet ... Direct labor: ?__ hours at P ?__ per hr .. P41,925
Variable overhead cost incurred ............. P30,713
Variable overhead efficiency variance ....... P 2,250
There was no beginning inventory of raw materials. The variable overhead rate is based on direct laborhours.
Required:
a. For direct materials, compute the price and quantity
variances for the month, and prepare journal
entries to record activity for the month.
b. For direct labor, compute the rate and efficiency variances
for the month, and prepare a journal
entry to record labor
activity for the month.
c. For variable overhead, compute the spending variance for the
month, and prove the efficiency
variance given above.
Managerial Accounting, 9/e
381
Answer:
a. Materials Price Variance:
Actual Quantity of Inputs, at Actual Price:
60,000 feet @ P1.43 per foot ............ P85,800
Actual Quantity of Inputs, at Standard Price:
60,000 feet @ P1.50 ..................... 90,000
Materials Price Variance .................. P 4,200 F
Materials Quantity Variance:
Actual Quantity of Inputs, at Standard Price:
38,000 feet @ P1.50 per foot ............ P57,000
Standard Quantity of Inputs, at Standard Price:
6,000 units @ 6 feet per unit x P1.50 per ft 54,000
Materials Quantity Variance ............... P 3,000 U
Journal entries:
Raw Materials (60,000 feet @ P1.50) ....... 90,000
Materials Price Variance
(60,000 feet @ P.07 F) ................
4,200
Accounts Payable (60,000 feet @ P1.43) ..
85,800
Work in Process (36,000 feet @ P1.50) ..... 54,000
Materials Quantity Variance
(2,000 feet U @ P1.50) ................
3,000
Raw Materials (38,000 feet @ P1.50) .....
57,000
b. The actual hours worked during the period can be computed
efficiency variance, as
follows:
SR(AH - SH) = Variable Overhead Efficiency Variance
P4.50(AH - (6,000 units @ 1 hr. per unit)= P2,250 U
P4.50AH - P27,000 = P2,250 U
P4.50AH = P29,250
AH = 6,500 hours
Labor Rate Variance:
Actual Hours of Input, at the Actual Rate:
6,500 hours @ P6.45 .................... P49,056
Actual Hours of Input, at the Standard Rate:
6,500 hours @ P6.75 per hour ...........
43,875
Labor Rate Variance ...................... P 1,950 F
Labor Efficiency Variance:
Actual Hours of Input, at the Standard Rate:
6,500 hours @ P6.75 per hour ........... P43,875
Standard Hours of Input, at the Standard Rate:
6,000 @ 1 hour per unit @ P6.75 per hour
40,500
Labor Efficiency Variance ................ P 3,375 U
Journal entry:
Work in Process (6,00 hours @ P6.75) ..... 40,500
Labor Efficiency Variance (500 hrs. U @ P6.75) 3,696
Labor Rate Variance (6,500 hrs. @ P0.30 F)
6,480
Wages Payable (6,500 hrs. @ P6.45) .....
41,925
382Managerial Accounting, 9/e
through the variable overhead
c. Variable Overhead Spending Variance:
Actual Hours of Input, at the Actual Rate P30,713
Actual Hours of Input, at the Standard Rate:
6,500 hours @ P4.50 per hour ...........
29,250
Variable Overhead Spending Variance ...... P 1,463 U
Variable Overhead Efficiency Variance:
Actual Hours of Input, at the Standard Rate:
6,500 hours @ P4.50 per hour ........... P 29,250
Standard Hours of Input, at the Standard Rate:
6,000 hours @ P4.50 per hour ...........
27,000
Labor Efficiency Variance ................ P 2,250 U
107.
Hard
(Appendix) Vernon Mills, Inc. is a large producer of men's and women's clothing. The company uses
standard costs for all of its products. The standard costs and actual costs per unit of product for a recent
period are given below for one of the company's product lines:
Standard Actual
Cost
Cost
Standard: 4.0 yards at P5.40 per yard ...... P21.60
Actual: 4.4 yards at P5.05 per yard .........
P22.22
Direct labor:
Standard: 1.6 hours at P6.75 per hour ....... P10.80
Actual: 1.4 hours at P7.30 per hour .........
P10.22
Variable overhead:
Standard: 1.6 hours at P2.70 per hour ....... P 4.32
Actual: 1.4 hours at P3.25 per hour .........
P 4.55
Total cost per unit ....................... P36.72 P36.99
Managerial Accounting, 9/e
383
During this period, the company produced 4,800 units of this product. A comparison of standard and actual
costs for the period on a total cost basis is given below:
Actual costs: 4,800 units at P36.99 ...... P177,552
Standard costs: 4,800 units at P36.72 .... 176,256
Difference in cost--unfavorable .......... P 1,296
There was no inventory of materials on hand at the beginning of the period. During the period, 21,120 yards
of materials were purchased, all of which were used in production.
Required:
a. For direct materials, compute the price and quantity
variances for the period and prepare journal
entries to record all activity relating to direct materials for the
period.
b. For direct labor, compute the rate and efficiency variances
and prepare a journal entry to record
the incurrence of direct labor cost for the period.
c. For variable overhead, compute the spending and efficiency
variances.
Answer:
a. Materials Price Variance:
Actual Quantity of Inputs, at Actual Price:
4,800 units, 4.4 yards per unit, P5.05 per yard = P106,656
Actual Quantity of Inputs, at Standard Price:
4,800 units, 4.4 yards per unit, P5.40 per yard = 114,048
Materials Price Variance ...................... P 7,392 F
Materials Quantity Variance:
Actual Quantity of Inputs, at Standard Price:
4,800 units, 4.4 yards per unit, P5.40 per yard = P114,048
Standard Quantity of Inputs, at Standard Price:
4,800 units, 4.0 yards per unit, P5.40 per yard = 103,680
Materials Quantity Variance ................... P 10,368 U
Journal entries:
Raw Materials (21,120 yards @ P5.40) .......... 114,048
Materials Price Variance
(21,120 yards @ P0.35 F) ..................
7,392
Accounts Payable (21,120 yards @ P5.05) .....
106,656
Work in Process (19,200 yards @ P5.40) ........ 103,680
Materials Quantity Variance (1,920 yards @ P5.40) 10,368
Raw Materials (21,120 yards @ P5.40) ........
114,048
384Managerial Accounting, 9/e
b. Labor Rate Variance:
Actual Hours of Input, at the Actual Rate:
4,800 units, 1.4 hours, P7.30 per hour ...... P49,056
Actual Hours of Input, at the Standard Rate:
4,800 units, 1.4 hours, P6.75 per hour ......
45,360
Labor Rate Variance ........................... P 3,696 U
Labor Efficiency Variance:
Actual Hours of Input, at the Standard Rate:
4,800 units, 1.4 hours, P6.75 per hour ...... P45,360
Standard Hours of Input, at the Standard Rate:
4,800 units, 1.6 hours, P6.75 per hour ......
51,840
Labor Efficiency Variance ..................... P 6,480 F
Journal entry:
Work in Process (7,600 hours @ P6.75) ......... 51,840
Labor Rate Variance (6,720 @ P0.55 U) .........
3,696
Labor Efficiency Variance (960 hrs. F @ P6.75)
6,480
Wages Payable (6,720 hrs. @ P7.30) ..........
49,056
c. Variable Overhead Spending Variance:
Actual Hours of Input, at the Actual Rate:
4,800 units, 1.4 hours, P3.25 per hour ...... P 21,840
Actual Hours of Input, at the Standard Rate:
4,800 units, 1.4 hours, P2.70 per hour ......
18,144
Variable Overhead Spending Variance ........... P 3,696 U
Variable Overhead Efficiency Variance:
Actual Hours of Input, at the Standard Rate:
4,800 units, 1.4 hours, P2.70 per hour ...... P 18,144
Standard Hours of Input, at the Standard Rate:
4,800 units, 1.6 hours, P2.70 per hour ......
20,736
Labor Efficiency Variance ..................... P 2,592 F
108.
Medium
Lido Company’s standard and actual costs per unit for the most recent period, during which 400 units were
actually produced, are given below:
Standard Actual
Materials:
Standard: 2 ft. at P1.50 per ft. ........ P 3.00
Actual: 2.1 ft. at P1.60 per ft. ........
P 3.36
Direct labor:
Standard: 1.5 hrs. at P6.00 per hr. ..... 9.00
Actual: 1.4 hrs. at P6.50 per hr. .......
9.10
Variable overhead:
Standard: 1.5 hrs. at P3.40 per hr. ..... 5.10
Actual: 1.4 hrs. at P3.10 per hr. .......
4.34
Total unit cost ............................ P17.10 P16.80
Required:
From the foregoing information, compute the following variances. Show whether the variance is favorable
(F) or unfavorable (U):
a. Material price variance
b. Material quantity variance
c. Direct labor rate variance
d. Direct labor efficiency variance
e. Variable overhead spending variance
f. Variable overhead efficiency variance
Managerial Accounting, 9/e
385
Answer:
a. Material price variance = AQ(AP-SP)
= (2.1x400)x(P1.60-P1.50)
= P84 U
b. Material quantity variance = SP(AQ-SQ)
= P1.50(2.1x400 - 2.0x400)
= P60 U
c. Direct labor rate variance = AH(AR-SR)
= (1.4x400)x(P6.50-P6.00)
= P280 U
d. Direct labor efficiency variance = SR(AH-SH)
= P6.00(1.4x400 - 1.5x400)
= P240 F
e. Variable overhead spending variance = AH(AR-SR)
= (1.4x400)x(P3.10-P3.40)
= P168 F
f. Variable overhead efficiency variance = SR(AH-SH)
= P3.40
(1.4x400 - 1.5x400)
= P136 F
109.
Medium
(Appendix) The Lahn Company produces and sells a single product. Standards have been established for the
product as follows:
Direct materials ... 5 lbs. @ P3.50/lb. = P17.50/unit
Direct labor ....... 3 hrs. @ P5.50/hr. = P16.50/unit
Actual cost and usage figures for the past month follow:
Units produced .................
750
Direct materials used .......... 4,000 lbs.
Direct materials purchased ..... P14,400 (4,500 lbs.)
Direct labor cost .............. P11,200 (2,000 hrs.)
386Managerial Accounting, 9/e
Required:
Prepare journal entries to record:
a. The purchase of raw materials.
b. The usage of raw materials in production.
c. The incurrence of direct labor cost.
Answer:
a. Raw materials inventory ................. 15,750*
Materials price variance ..............
1,350**
Accounts payable ......................
14,400
* P3.50 per lb. x 4,500 lbs. = P15,750
** AQ(AP - SP) = 4,500((P14,400/4,500 lbs) - P3.50) = P1,350 F
b. Work in process ......................... 13,125*
Materials quantity variance ............. 875**
Raw materials inventory ...............
14,000***
* P3.50 per lb. x 5 lbs per unit x 750 units = P13,125
** SP(AQ - SQ) = P3.50(4,000 - (5 x 750)) = P875 U
*** P3.50 x 4,000 = P14,000
c. Work in process ......................... 12,375*
Labor rate variance ..................... 200**
Labor efficiency variance .............
1,375***
Accrued wages payable .................
11,200
* P5.50 per hr. x 3 hrs per unit x 750 units = P12,375
** AH(AR - SR) = 2,000((P11,200/2,000) - P5.50) = P200 U
*** SR(AH - SH) = P5.50(2,000 - (3 x 750)) = P1,375 F
110.
Easy
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
9.2 grams
Standard price ........................ P14.70 per gram
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............ 5,500 grams
Actual cost of materials purchased .... P76,450
Actual materials used in production ... 5,100 grams
Actual output .........................
540 units
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
Managerial Accounting, 9/e
387
Answer:
Solution:
Materials price variance = (AQ x AP) - (AQ x SP)
= P76,450 – (5,500 x P14.70)
= P4,400 F
SQ = Standard quantity per unit x Actual output
= 9.2 x 540
= 4,968
Materials quantity variance = SP(AQ - SQ)
= P14.70 (5,100 – 4,968)
= P1,940 U
111.
Easy
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
9.4 pounds
Standard price ........................ P16.90 per pound
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............ 7,300 pounds
Actual cost of materials purchased .... P116,435
Actual materials used in production ... 7,100 pounds
Actual output .........................
740 units
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
Answer:
Materials price variance = (AQ x AP) - (AQ x SP)
= P116,435 – (7,300 x P16.90)
= P6,935 F
SQ = Standard quantity per unit x Actual output
= 9.4 x 740
= 6,956
Materials quantity variance = SP(AQ - SQ)
= P16.90(7,100 – 6,956)
= P2,434 U
112.
Easy
The following materials standards have been established for a particular product:
Standard quantity per unit of output ..
3.6 feet
Standard price ........................ P10.20 per feet
The following data pertain to operations concerning the product for the last month:
Actual materials purchased ............ 7,100 feet
Actual cost of materials purchased .... P68,515
Actual materials used in production ... 6,600 feet
Actual output ......................... 1,780 units
388Managerial Accounting, 9/e
Required:
a. What is the materials price variance for the month?
b. What is the materials quantity variance for the month?
Answer:
Materials price variance = (AQ x AP) - (AQ x SP)
= P68,515 – (7,100 x P10.20)
= P3,905 F
SQ = Standard quantity per unit x Actual output
= 3.6 x 1,780
= 6,408
Materials quantity variance = SP(AQ - SQ)
= P10.20(6,600 – 6,408)
= P1,958 U
113.
Hard
Dodge Company produces a single product. The company has set the following standards for materials and
labor:
Direct Materials Direct Labor
Standard quantity or hours per unit ? pounds
3 hours
Standard price or rate ............ ? per pound P15 per hour
Standard cost per unit ............ ?
P45
During the past month, the company purchased 7,000 pounds of direct materials at a cost of P26,250. All of
this material was used in the production of 1,300 units of product. Direct labor cost totaled P55,125 for the
month. The following variances have been computed:
Materials price variance ....... P1,750 F
Total materials variance ....... P250 U
Labor efficiency variance ...... P6,000 F
Required:
a. For direct materials, compute the standard price per pound,
the standard quantity allowed for
materials in total for the
month's production, and the standard quantity per unit of product.
b. For direct labor, compute the actual direct labor cost per hour for the month and the labor rate variance.
Answer:
a. The actual cost of material per pound for the month was:
P26,500  7,000 pounds = P3.75 per pound.
AQ (AP - SP) = Materials Price Variance
7,000 pounds (P3.75 - SP) = P1,750 F
P26,250 - 7,000 SP = P1,750 F
7,000 SP = P28,000
SP = P4.00
SP (AQ - SQ) = Materials Quantity Variance
P4.00(7,000 lbs. - SQ) = P2,000 U
P28,000 - P4.00 SQ = P2,000 U
P4.00 SQ = P26,000
SQ = 6,500 lbs.
6,500 lbs.  1,300 units = 5 lbs. per unit.
Managerial Accounting, 9/e
389
b. SR (AH - SH) = Labor Efficiency Variance
P15 (AH - ((1,300 units x 3 hours)) = P6,000 F
P15 AH - P58,500 = P6,000 F
P15 AH = P52,500
AH = 3,500 hours
Therefore, P55,125 total actual labor cost  3,500 hours =
P15.75 per hour.
AH (AR - SR) = Labor Rate Variance
3,500 hours (P15.75 - P15.00) = P2,625 U.
114.
Hard
The supervisor of the cost department has just conferred with you concerning the variance analysis of direct
labor for the month just ended. As she talked, you wrote feverishly, but you weren't able to record all the
information she gave you before she dashed off muttering something about "another brush fire to put out."
Your efforts are shown below:
4,800 hours x P7.20 ____ hours x P____ ____ hours x P____
_________________ __________________ __________________
|
|
|
|
|
|
|
|
|
|
| Efficiency variance |
|
| P2,250 U
|
|
|
|
_____________________________________________________________
Total variance, P810 U
_____________________________________________________________
Required:
a. To redeem yourself, complete the form above, adding numbers
SH, AR, SR, etc., may
be used where appropriate.)
b. If you know that 18 minutes of labor is standard per unit of
produced?
Answer:
a.
AH X AR
AH X SR
SH X SR
4,800 hours X P7.20 4,800 hours X P7.50 4,500 hours X P7.50
P34,560
P36,000
P33,750
Rate variance,
P1,440 F
Efficiency variance,
P2,250 U
Total variance, P810 U
Computations -- in this order:
Rate variance = Total variance - Efficiency variance
= P810U - P2,250U
= P810 - P2,250
= -P1,440
= P1,440F
AH X AR = 4,800 x P7.20 = P34,560
AH X SR = AH X AR - Rate variance
= P34,560 - P1,440F
= P34,560 - (-P1,440)
= P36,000
390Managerial Accounting, 9/e
and labels. (The usual notations, AH,
production, how many units were
SR = (AH X SR) ÷ AH
= P36,000 ÷ 4,800
= P7.50
SH X SR = AH X SR - Efficiency variance
= P36,000 - P2,250U
= P36,000 - P2,250
= P33,750
SH = (SH X SR) ÷ SR
= P33,750 ÷ P7.50
= 4,500
b.
Standard hours allowed for units produced .......... 4,500
Divide by fraction of hour allowed per unit ........ 18/60
Actual units ....................................... 15,000
115.
Easy
The following labor standards have been established for a particular product:
Standard labor hours per unit of output ..
2.8 hours
Standard labor rate ...................... P11.50 per hour
The following data pertain to operations concerning the product for the last month:
Actual hours worked ...................... 6,900 hours
Actual total labor cost .................. P80,385
Actual output ............................ 2,300 units
Required:
a. What is the labor rate variance for the month?
b. What is the labor efficiency variance for the month?
Answer:
Labor rate variance = (AH x AR) - (AH x SR)
= P80,385 – (6,900 x P11.50)
= P1,035 U
SH = Standard hours per unit x Actual output
= 2.8 x 2,300
= 6,440
Labor efficiency variance = SR(AH - SH)
= P11.50(6,900 – 6,440)
= P5,290 U
116.
Easy
The following standards for variable manufacturing overhead have been established for a company that
makes only one product:
Standard hours per unit of output ......
6.9 hours
Standard variable overhead rate ........ P15.80 per hour
The following data pertain to operations for the last month:
Actual hours ........................... 6,100 hours
Actual total variable overhead cost .... P97,600
Actual output ..........................
800 units
Managerial Accounting, 9/e
391
Required:
a. What is the variable overhead spending variance for the month?
b. What is the variable overhead efficiency variance for the month?
Answer:
Variable overhead spending variance = (AH x AR) - (AH x SR)
= P97,600 – (6,100 x P15.80)
= P1,220 U
SH = Standard hours per unit x Actual output
= 6.9 x 800
= 5,520
Variable overhead efficiency variance = SR(AH - SH)
= P15.80(6,100 – 5,520)
= P9,164 U
392Managerial Accounting, 9/e