05 x05 standard costing & variance analysis

1

PAGE Standard Costs and Variance Analysis

STANDARD COSTS AND VARIANCE ANALYSIS

THEORIES:

Standard cost system

1.A primary purpose of using a standard cost system is

A.to make things easier for managers in the production facility.

B.to provide a distinct measure of cost control.

C.to minimize the cost per unit of production.

D.b and c are correct

2.Which one of the following statements is true concerning standard costs?

A.Standard costs are estimates of costs attainable only under the most ideal conditions, but rarely practicable.

B.Standard costs are difficult to use with a process-costing system.

C.If properly used, standards can help motivate employees.

D.Unfavorable variances, material in amount, should be investigated, but large favorable variances need not be investigated.

3.Which of the following is a purpose of standard costing?

A.Determine breakeven production level

B.Control costs

C.Eliminate the need for subjective decisions by management

D.Allocate cost with more accuracy

4.When evaluating the operating performance management sometimes uses the difference between expected and actual performance. This refers to:

A.Management by DeviationC.Management by Objective

B.Management by ControlD.Management by Exception

Standard setting

5.The best basis upon which cost standards should be set to measure controllable production inefficiencies is

A.Engineering standards based on ideal performance

B.Normal capacity

C.Engineering standards based on attainable performance

D.Practical capacity

6.A company employing very tight (high) standards in a standard cost system should expect that

A.No incentive bonus will be paid.

B.Most variances will be unfavorable.

C.Employees will be strongly motivated to attain the standard.

D.Costs will be controlled better than if lower standards were used.

7.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

8.Which of the following statements about the selection of standards is true?

A.Ideal standards tend to extract higher performance levels since they give employees something to live up to.

B.Currently attainable standards may encourage operating inefficiencies.

C.Currently attainable standards discourage employees from achieving their full performance potential.

D.Ideal standards demand maximum efficiency which may leave workers frustrated, thus causing a decline in performance.

Standard costs vs. budgeted costs

9.A difference between standard costs used for cost control and the budgeted costs representing the same manufacturing effort can exist because

A.standard costs must be determined after the budget is completed

B.standard costs represent what costs should be while budgeted costs represent expected actual costs

C.budgeted costs are historical costs while standard costs are based on engineering studies

D.budgeted costs include some slack or padding while standard costs do not

Process costing

10.When standard costs are used in a process-costing system, how, if at all, are equivalent units involved or used in the cost report at standard?

A.Equivalent units are not used.

B.Equivalent units are computed using a special approach.

C.The actual equivalent units are multiplied by the standard cost per unit.

D.The standard equivalent units are multiplied by the actual cost per unit.

Normal costing

11.The fixed overhead application rate is a function of a predetermined normal activity level. If standard hours allowed for good output equal this predetermined activity level for a given period, the volume variance will be

A.Zero

B.Favorable

C.Unfavorable

D.Either favorable or unfavorable, depending on the budgeted overhead.

Types of standards

12.The absolute minimum cost possible under the best conceivable operating conditions is a description of which type of standard?

A.Currently attainable (expected)C.Theoretical

B.NormalD.Practical

13.Standards, which are difficult to achieve due to reasons beyond the individual performing the task, are the result of firm using which of the following methods to establish standards?

A.Ideal StandardsC.Practical Standards

B.Lax StandardsD.Employee Standards

14.Standards that represent levels of operation that can be attained with reasonable effort are called:

A.theoretical standardsC.variable standards

B.ideal standardsD.normal standards

Variances

Generic variances

15.When performing input/output variance analysis in standard costing, standard hours allowed is a means of measuring

A.Standard output at standard hoursC.Actual output at standard hours

B.Standard output at actual hoursD.Actual output at actual hours

Two way variances

Volume variance

16.A company uses a two-way analysis for overhead variances: budget (controllable) and volume. The volume variance is based on the

A.Total overhead application rate

B.Volume of total expenses at various activity levels

C.Variable overhead application rate

D.Fixed overhead application rate

17.Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the:

A.factory overhead cost volume variance

B.direct labor cost efficiency variance

C.direct labor cost rate variance

D.factory overhead cost controllable variance

18.In analyzing manufacturing overhead variances, the volume variance is the difference between the:

A.amount shown in the flexible budget and the amount shown in the debit side of the overhead control account

B.predetermined overhead application rate and the flexible budget application rate times actual hours worked

C.budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period

D.actual amount spent for overhead items during the period and the overhead amount applied to production during the period

19.The variance least significant for purposes of controlling costs is the:

A.material usage variance

B.variable overhead efficiency variance

C.fixed overhead spending variance

D.fixed overhead volume variance

20.The variance most useful in evaluating plant utilization is the:

A.variable overhead spending variance

B.fixed overhead spending variance.

C.variable overhead efficiency variance

D.fixed overhead volume variance

Four way variances

21.The choice of production volume as a denominator for calculating its factory overhead rate

A.Has no effect on the fixed factory overhead rate for applying costs to production

B.Has an effect on the variable factory overhead rate for applying costs to production

C.Has no effect on the fixed factory overhead budget variance

D.Has no effect on the fixed factory overhead production volume variance

22.The budgeted overhead costs for standard hours allowed and the overhead costs applied to product are the same amount

A.for both variable and fixed overhead costs.

B.only when standard hours allowed is less than normal capacity.

C.for variable overhead costs.

D.for fixed overhead costs.

Responsibility for variances

23.Which department is customarily held responsible for an unfavorable materials usage variance?

A.Quality controlC.Purchasing

B.EngineeringD.Production

Variance analysis

24.Which of the following should be least considered when deciding whether to investigate a variance?

A.Whether the variance is favorable or unfavorable

B.Significance of the variance

C.Cost of investigating the variance

D.Trend of the variances over time

Total materials variance

25.If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to price and usage?

A.There is no need to further evaluate the total materials variance if it is favorable

B.Generally accepted accounting principles require that all variances be analyzed in three stages

C.All variances must appear in the annual report to equity owners for proper disclosure

D.To allow management to evaluate the efficiency of the purchasing and production functions

Labor variances

26.Which of the following unfavorable cost variances would be directly affected by the relative position of a production process on a learning curve?

A.Materials mixC.Labor rate

B.Materials priceD.Labor efficiency

27.Which of the following is the most probable reason with a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?

A.The mix of workers assigned to the particular job was heavily weighted toward the use of higherly paid, experienced individuals.

B.The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low paid, unskilled workers.

C.Because of the productive schedule, workers from other production areas were assigned to assist in this particular process.

D.Defective materials caused more labor to be used in order to produce a standard unit.

Two-way overhead variance

28.The budget for a given cost during a given period was P1,600,000. The actual cost for the period was P1,440,000. Considering these facts, it can be said that the plant manager has done a better than expected job in controlling the cost if:

A.The cost is variable and actual production was 90% of budgeted production

B.The cost is variable and actual production equaled budgeted production

C.The cost is variable and actual production was 80% of budgeted production

D.The cost is discretionary fixed cost and actual production equaled budgeted production

Budget variance

29.The budget variance for fixed factory overhead for the normal-volume, practical-capacity, and expected-activity levels would be the:

A.Same except for normal volumeC.Same except for expected activity

B.Same except for practical capacityD.Same for all three activity levels

Volume variance

30.You have leased a 5,000-gallon storage tank for P5,000 per month. You stored 4,000 gallons of liquid in the tank during the month. The cost of storage was P1.25 per gallon, rather than P1.00 per gallon based on 5,000 gallon capacity. Therefore, the cost of storing 4,000 gallons was P1,000 more (P.25 x 4,000) in total than if you had stored 5,000 gallons of liquid in the tank. Which variance is being described?

A.Variable-overhead efficiency variance

B.Fixed-overhead spending variance

C.Variable-overhead spending variance

D.Fixed-overhead volume variance

31.Favorable fixed overhead volume variance occurs if:

A.there is a favorable labor efficiency variance

B.there is a favorable labor rate variance

C.production is less than planned

D.production is greater than planned

32.The unfavorable volume variance may be due to all but which of the following factors?

A.failure to maintain an even flow of work

B.machine breakdowns

C.unexpected increases in the cost of utilities

D.failure to obtain enough sales orders

33.How will a favorable volume variance affect net income under each of the following methods?

AbsorptionVariable

A.DecreaseNo effect

B.DecreaseIncrease

C.IncreaseNo effect

D.IncreaseDecrease

34.Favorable volume variances may be harmful when:

A.machine repairs cause work stoppages

B.supervisors fail to maintain an even flow of work

C.production in excess of normal capacity cannot be sold

D.there are insufficient sales orders to keep the factory operating at normal capacity

Three-way Overhead variance

35.During 2006, a departments three-variance overhead standard costing system reported unfavorable spending and volume variances. The activity level selected for allocating overhead to the product was based on 80% of practical capacity. It 100% of practical capacity had been selected instead, how would the reported unfavorable spending and volume variances be affected?

Spending VarianceVolume Variance

A.IncreasedUnchanged

B.IncreasedIncreased

C.UnchangedIncreased

D.UnchangedUnchanged

PROBLEMS:

Standard setting

Raw Materials

.Shampoo Company is a chemical manufacturer that supplies industrial users. The company plans to introduce a new chemical solution and needs to develop a standard product cost for this new solution.

The new chemical solution is made by combining a chemical compound (Nyclyn) and a solution (Salex), boiling the mixture; adding a second compound (Protet), and bottling the resulting solution in 20-liter containers. The initial mix, which is 20 liters in volume, consists of 24 kilograms of Nyclyn and 19.2 liters of Salex. A 20% reduction in volume occurs during the boiling process. The solution is then cooled slightly before 10 kilograms of Protet are added; the addition of Protet does not affect the total liquid volume.

The purchase prices of the raw materials used in the manufacture of this new chemical solution are as follows:

NyclynP15.00 per kilogram

SalexP21.00 per liter

ProtetP28.00 per kilogram

The total standard materials cost of 20 liters of the product is:

A.P1,043.20C.P 834.56

B.P1,304.00D.P1,234.00

.El Andre Co. uses a standard costing system in connection with the manufacture of a line of T-shirts. Each unit of finished product contains 2.25 yards of direct material. However, a 25 percent direct material spoilage calculated on input quantities occurs during the manufacturing process. The cost of the direct materials is P150 per yard. The standard direct material cost per unit of finished product is

A.P 253C.P 450

B.P 422D.P 405

.Each finished unit of Product EM contains 60 pounds of raw material. The manufacturing process must provide for a 20% waste allowance. The raw material can be purchased for P2.50 a pound under terms of 2/10, n/30. The company takes all cash discounts. The standard direct material cost for each unit of EM is:

A.P180.00C.P187.50

B.P183.75D.P176.40

.The Vandana Company has a signature scarf for ladies that is very popular. Certain production and marketing data are indicated below:

Cost per yard of clothP40.00

Allowance for rejected scarf5% of production

Yards of cloth needed per scarf0.475 yard

Airfreight from supplierP1.00/yard

Motor freight to customersP0.90 /scarf

Purchase discounts from supplier3%

Sales discount to customers2%

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 Vandana Company should use in its cost sheets.

A.P19.85C.P19.40

B.P20.00D.P19.90

Direct labor

.Double M company is a chemical manufacturer that supplies various products to industrial users. The company plans to introduce a new chemical solution called Bysap, for which it needs to develop a standard product cost. The following labor information is available on the production of Bysap.

The product, which is bottled in 10-liter containers, is primarily a mixture of Byclyn, Salex, and Protet.

The finished product is highly unstable, and one 10-liter batch out of six is rejected at final inspection. Rejected batches have no commercial value and are thrown out.

It takes a worker 35 minutes to process one 10-liter batch of Bysap. Employees work on eight-hour a day, including one hour per day for rest breaks and cleanup.

What is the standard labor time to produce one 10-liter batch of Bysap?

A.35 minutesC.48 minutes

B.40 minutesD.45 minutes

.The following direct labor information pertains to the manufacture of Part J35:

Number of hours required to make a part2.5 DLH

Number of Direct workers75

Number of total productive hours per week3000

Weekly wages per workerP1,000

Laborers fringe benefits treated as direct labor costs25% of wages

What is the standard direct labor cost per unit of Part J35?

A.P62.500C.P41.670

B.P78.125D.P84.125

Materials & Labor

Questions Nos. 7 and 8 are based on the following:Supercold Company is a small producer of fruit-flavored frozen desserts. For many years, Supercolds products have had strong regional sales on the basis of brand recognition. However, other companies have begun marketing similar products in the area, and price competition has become increasingly important. Haydee Mejia, the companys controller, is planning to implement a standard costing system for Supercold and has gathered considerable information on production and material requirements for Supercolds products. Haydee believes that the use of standard costing will allow Supercold to improve cost control and make better pricing decisions.

Supercolds most popular products is strawberry sherbet. The sherbet is produced in 10-gallon batches, and each batch requires six quarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. Because of imperfections in the strawberries and normal spoilage, one quart of berries is discarded for every four quarts of acceptable berries. Three minutes is the standard direct labor time for sorting that is required to obtain one quart of acceptable berries. The acceptable berries are then blended with the other ingredients; blending requires 12 minutes of direct labor time per batch. After blending, the sherbet is package in quart containers. Haydee has gathered the following information from Rizza Alano, Supercolds cost accountant.

Supercold purchases strawberries at a cost of P8.00 per quart. All other ingredients cost a total of P4.50 per gallon.

Direct labor is paid at the rate of P50 per hour.

The total cost of material and labor required to package the sherbet is P3.80 per quart.

Rizza Alano has a friend who owns a berry farm that has been losing money in recent years. Because of good crops, there has been an oversupply of strawberries, and prices have dropped to P5.00 per quart. Rizza has arranged for Supercold to purchase strawberries form her friend and hopes that P8.00 per quart will help her friends farm become profitable again.

.The standard materials cost per 10-gallon batch of strawberry sherbet is:

A.P 85.00C.P101.00

B.P 60.00D.P105.00

.The standard direct labor cost per 10-gallon batch of sherbet is:

A.P50.00C.P25.00

B.P28.75D.P15.00

Materials variance

.Under a standard cost system, the materials quantity variance was recorded at P1,970 unfavorable, the materials price variance was recorded at P3,740 favorable, and the Goods in Process was debited for P51,690. Ninety-six thousand units were completed. What was the per unit price of the actual materials used?

A.P0.52 eachC.P0.54 eac

B.P0.53 eachD.P0.51 each

.Blake Company has a standard price of P5.50 per pound for materials. Julys results showed an unfavorable material price variance of P44 and a favorable quantity variance of P209. If 1,066 pounds were used in production, what was the standard quantity allowed for materials?

A.1,104C.1,066

B.1,074D.1,100

.Elite Company uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material in inventory were purchased for P105,000, and two units of raw material are required to produce one unit of final product. In November, the company produced 12,000 units of product. The standard allowed for material was P60,000, and there was an unfavorable quantity variance of P2,500. The materials price variance for the units used in November was

A.P 2,500 UC.P12,500 U

B.P11,000 UD.P 3,500 F

.Sheridan Company has a standard of 15 parts of component BB costing P1.50 each. Sheridan purchased 14,910 units of component BB for P22,145. Sheridan generated a P220 favorable price variance and a P3,735 favorable quantity variance. If there were no changes in the component inventory, how many units of finished product were produced?

A.994 units.C.1,000 units

B.1,090 units.D.1,160 units

.The standard usage for raw materials is 5 pounds at P40.00 per pound. Cave Company spent P131,200 in purchasing 3,200 pounds. Cave used 3,150 pounds to produce 600 units of finished product. The material quantity variance is:

A.P6,000 unfavorableC.P3,200 unfavorable

B.P5,200 unfavorableD.P2,000 unfavorable

.The Bohol Company uses standard costing. The following data are available for October:

Actual quantity of direct materials used23,500 pounds

Standard price of direct materialsP2 per pound

Material quantity varianceP1,000 U

The standard quantity of materials allowed for October production is:

A.23,000 lbsC.24,000 lbs

B.24,500 lbsD.25,000 lbs

.Information on Dulces direct material costs for May is as follows:

Actual quantity of direct materials purchased and used30,000 lbs.

Actual cost of direct materialsP84,000

Unfavorable direct materials usage varianceP 3,000

Standard quantity of direct materials allowed for May production29,000 lbs

For the month of May, Dulces direct materials price variance was:

A.P2,800 favorableC.P2,800 unfavorable

B.P6,000 unfavorableD.P6,000 favorable

.Information on Katrina Companys direct material costs is as follows:

Standard unit priceP 3.60

Actual quantity purchased 1,600

Standard quantity allowed for actual production 1,450

Materials purchase price variance favorableP 240

What was the actual purchase price per unit, rounded to the nearest centavos?

A.P3.06C.P3.11

B.P3.45D.P3.75

.Palmas Company, which has a standard cost system, had 500 units of raw material X in its inventory at June 1, purchased in May for P1.20 per unit and carried at a standard cost of P1.00. The following information pertains to raw material X for the month of June:

Actual number of units purchased1,400

Actual number of units used1,500

Standard number of units allowed for actual production 1,300

Standard cost per unitP1.00

Actual cost per unitP1.10

The unfavorable materials purchase price variance for raw material X for June was:

A.P 0C.P140

B.P130 D.P150

.During March, Lumban Companys direct material costs for the manufacture of product T were as follows:

Actual unit purchase priceP6.50

Standard quantity allowed for actual production2,100

Quantity purchased and used for actual production2,300

Standard unit priceP6.25

Lumbans material usage variance for March was:

A.P1,250 unfavorableC.P1,250 favorable


.Razonable Company installs shingle roofs on houses. The standard material cost for a Type R house is P1,250, based on 1,000 units at a cost of P1.25 each. During April, Razonable installed roofs on 20 Type R houses, using 22,000 units of material cost of P26,400. Razonables material price variance for April is:

A.P1,000 favorableC.P1,100 favorable


.Samson Candle Co. manufactures candles in various shapes, sizes, colors, and scents. Depending on the orders received, not all candles require the same amount of color, dye, or scent materials. Yields also vary, depending upon the usage of beeswax or synthetic wax. Standard ingredients for 1,000 pounds of candles are:

Input:Standard MixStandard Cost per Pound

Beeswax 200 lbs.1.00

Synthetic wax 840 lbs.0.20

Colors 7 lbs.2.00

Scents 3 lbs.6.00

Totals1,050 lbs.9.20

Standard output1,000 lbs.

Price variances are charged off at the time of purchase. During January, the company was busy manufacturing red candles for Valentines Day. Actual production then was:

Input:In Pounds

Beeswax4,100

Synthetic wax13,800

Colors2,200

Scents 60

Total20,160

Actual output 18,500

The material yield variance is:

A.P 280 unfavorableC.P 280 favorable


Labor variance

.The flexible budget for the month of May 2007 was for 9,000 units with direct material at P15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of P81,000. Actual output for the month was 8,500 units with P127,500 in direct material and P77,775 in direct labor expense. Direct labor hours of 6,375 were actually worked during the month. Variance analysis of the performance for the month of May would show a(n):

A.favorable material quantity variance of P7,500.

B.unfavorable direct labor efficiency variance of P1,275.

C.unfavorable material quantity variance of P7,500.

D.unfavorable direct labor rate variance of P1,275.

.The standard hourly rate was P4.10. Standard hours for the level of production are 4,000. The actual rate was P4.27. The labor rate variance was P654.50, unfavorable. What were the actual labor hours?

A.3,700C.3,850

B.4,150D.4,000

.Clean Harry Corp. uses two different types of labor to manufacture its product. The types of labor, Mixing and Finishing, have the following standards:Labor TypeStandard MixStd Hourly RateStandard Cost

Mixing500 hoursP10P5,000

Finishing250 hoursP 5P1,250

Yield:4,000 units

During January, the following actual production information was provided:

Labor TypeActual Mix

Mixing4,500 hours

Finishing3,000 hours

Yield: 36,000 units

What is the labor mix variance?

A.P2,500 FC.P2,500 U

B.P5,000 FD.P5,000 F

.How much labor yield variances should be reported?A.P6,250 UC.P5,250 F

B.P6,250 FD.P5,250 U

.Hingis had a P750 unfavorable direct labor rate variance and an P800 favorable efficiency variance. Hingis paid P7,150 for 800 hours of labor. What was the standard direct labor wage rate?

A.P8.94C.P8.00

B.P7.94D.P7.80

.Powerless Companys operations for April disclosed the following data relating to direct labor:

Actual costP10,000

Rate variance 1,000 favorable

Efficiency variance 1,500 unfavorable

Standard cost P 9,500Actual direct labor hours for April amounted to 2,000. Powerless standard direct labor rate per hour in April was:

A.P5.50C.P5.00

B.P4.75D.P4.50

.Lion Companys direct labor costs for the month of January were as follows:

Actual direct labor hours20,000

Standard direct labor hours21,000

Direct labor rate variance Unfav. P 3,000

Total payroll P126,000

What was Lions direct labor efficiency variance?


B.P6,300 favorableD.P6,450 favorable

.Using the information given below, determine the labor efficiency variance:

Labor price per hourP 20

Standard labor price per gallon of output at 20 gal./hrP 1

Standard labor cost of 8,440 gallons of actual outputP8,440

Actual total inputs(410 hours at P21/hr)P8,610

A.P 410 unfavorableC.P 240 favorable

B.P 170 unfavorableD.P 410 favorable

.Simbad Companys operations for the month just ended originally set up a 60,000 direct labor hour level, with budgeted direct labor of P960,000 and budgeted variable overhead of P240,000. The actual results revealed that direct labor incurred amounted to P1,148,000 and that the unfavorable variable overhead variance was P40,000. Labor trouble caused an unfavorable labor efficiency variance of P120,000, and new employees hired at higher rates resulted in an actual average wage rate of P16.40 per hour. The total number of standard direct labor hours allowed for the actual units produced is

A.P52,500C.P62,500

B.P77,500D.P70,000

Questions 30 and 31 are based on the following information.

Information on Goodeve Companys direct labor costs are presented below:Standard direct labor hours 30,000

Actual direct labor hours 29,000

Direct labor efficiency variance Favorable P 4,000

Direct labor rate variance Favorable P 5,800

Total payroll P110,200

.What was Goodeves standard direct labor rate?

A.P3.54C.P3.80

B.P4.00D.P5.80

.What was Goodeves actual direct labor rate?

A.P3.60C.P3.80

B.P4.00D.P5.80

.The Islander Corporation makes a variety of leather goods. It uses standards 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?

A.50,250C.58,625

B.48,550D.37,520

.Information on Barber Companys direct labor costs for the month of January is as follows:

Actual direct labor hours 34,500

Standard direct labor hours 35,000

Total direct labor payroll P241,500

Direct labor efficiency variance favorable P 3,200

What is Barbers direct labor rate variance?

A.P17,250 UC.P21,000 U

B.P20,700 UD.P21,000 F

.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 hourP 10.00

Actual direct labor rate per hourP 9.00

Labor rate variance (favorable)P12,000

Actual output (units) 2,000

Standard hours allowed for actual production 10,000 hours

How many actual labor hours were worked during March for STA Company?

A.10,000C. 8,000

B.12,000D.10,500

.Information of Hanes direct labor costs for the month of May is as follows:

Actual direct labor rateP7.50

Standard direct labor hours allowed 11,000

Actual direct labor hours10,000

Direct labor rate variance favorable P5,500

What was the standard direct labor rate in effect for the month of May?

A.P6.95C.P8.00

B.P7.00D.P8.05

Two-way overhead variance

.The overhead variances for Big Company were:

Variable overhead spending variance: P3600 favorable.

Variable overhead efficiency variance: P6,000 unfavorable.

Fixed overhead spending variance: P10,000 favorable.

Fixed overhead volume variance: P24,000 favorable.

What was the overhead controllable variance?


B.P13,600 favorableD.P 7,600 favorable

.Kent Company sets the following standards for 2007:

Direct labor cost (2 DLH @ P4.50)P 9.00

Manufacturing overhead (2 DLH @ P7.50) 15.00

Kent Company plans to produce its only product equally each month. The annual budget for overhead costs are:

Fixed overheadP150,000

Variable overhead 300,000

Normal activity in direct labor hours 60,000

In March, Kent Company produced 2,450 units with actual direct labor hours used of 5,050. Actual overhead costs for the month amounted to P37,245 (Fixed overhead is as budgeted.)

The amount of overhead volume variance for Kent Company is

A.P250 unfavorableC.P500 unfavorable

B.P750 UnfavorableD.P375 Unfavorable

.Calma Company uses a standard cost system. The following budget, at normal capacity, and the actual results are summarized for the month of December:

Direct labor hours 24,000

Variable factory OH P 48,000

Fixed factory OH P108,000

Total factory OH per DLH P 6.50

Actual data for December were as follows:

Direct labor hours worked 22,000

Total factory OH P147,000

Standard DLHs allowed for capacity attained21,000

Using the two-way analysis of overhead variance, what is the controllable variance for December?

A.P 3,000 FavorableC.P 5,000 Favorable

B.P 9,000 FavorableD.P10,500 Unfavorable

.Heart Company uses a flexible budget system and prepared the following information for the year:

Percent of Capacity80 Percent90 Percent

Direct labor hours24,00027,000

Variable factory overheadP 54,000P 60,750

Fixed factory overheadP 81,000P 81,000

Total factory overhead rate per DLHP5.625P5.25

Heart 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?

A.P 9,000 unfavorableC.P 9,000 favorable


.The Fire Company has a standard absorption and flexible budgeting system and uses a two-way analysis of overhead variances. Selected data for the June production activity are:

Budgeted fixed factory overhead costsP 64,000

Actual factory overhead 230,000

Variable factory overhead rater per DLHP 5

Standard DLH 32,000

Actual DLH 32,000

The budget (controllable) variance for June is


B.P6,000 favorableD.P6,000 unfavorable

.Sorsogon Company had actual overhead of P14,000 for the year. The company applied overhead of P13,400. If the overhead budgeted for the standard hours allowed is P15,600, the overhead controllable variance is

A.P 600 FavorableC.P1,600 Favorable

B.P2,200 UnfavorableD.P1,600 Unfavorable

.Compo Co. uses a predetermined factory O/H application rate based on direct labor cost. For the year ended December 31, Compos budgeted factory O/H was P600,000, based on a budgeted volume of 50,000 direct labor hours, at a standard direct labor rate of P6 per hour. Actual factory O/H amounted to P620,000, with actual direct labor cost of P325,000. For the year, over-applied factory O/H was

A.P20,000C.P30,000

B.P25,000D.P50,000

.The Terrain Company has a standard absorption and flexible budgeting system and uses a two-way analysis of overhead variances. Selected data for the June production activity are:

Budgeted fixed factory overhead costsP 64,000

Actual factory overhead 230,000

Variable factory overhead rater per DLH P 5

Standard DLH 32,000

Actual DLH 32,000

The budget (controllable) variance for the month of June is:


B.P6,000 favorableD.P6,000 unfavorable

.The standard factory overhead rate is P10 per direct labor hour (P8 for variable factory overhead and P2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:

Standard:25,000 hours at P10P250,000

Actual:Variable factory overhead202,500

Fixed factory overhead60,000

What is the amount of the factory overhead volume variance?

A.12,500 favorableC.12,500 unfavorable

B.10,000 unfavorableD.10,000 favorable

Three-way overhead variance

.The following data are the actual results for Wow Company for the month of May:

Actual output4,500 units

Actual variable overheadP360,000

Actual fixed overheadP108,000

Actual machine time14,000 MH

Standard cost and budget information for Wow Company follows:

Standard variable overhead rateP6.00 per MH

Standard quantity of machine hours3 hours per unit

Budgeted fixed overheadP777,600 per year

Budgeted output4,800 units per month

The overhead efficiency variance is

A.P3,000 FavorableC.P3,000 Unfavorable

B.P5,400 FavorableD.P5,400 Unfavorable

.The Libiran Company produces its only product, Menthol Chewing Gum. The standard overhead cost for one pack of the product follows:

Fixed overhead (1.50 hours at P18.00)P27.00

Variable overhead (1.50 hours at P10.00) 15.00

Total application rateP42.00Libiran uses expected volume of 20,000 units. During the year, Libiran used 31,500 direct labor hours for the production of 20,000 units. Actual overhead costs were P545,000 fixed and P308,700 variable.

The overhead efficiency variance is

A.P22,500 FavorableC.P15,000 Favorable


.Abbey Company produces a single product. Abbey employs a standard cost system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Abbey used a standard overhead rate equal to P8.50 per direct labor hour. The rate was computed using normal activity. Budgeted overhead costs are P100,000 for 10,000 direct labor hours and P160,000 for 20,000 direct labor hours. During the past year, Abbey generate the following data:

Actual production: 1,400 units

Fixed overhead volume variance: P5,000 U

Variable overhead efficiency variance: P3,000 F

Actual fixed overhead costs: P42,670

Actual variable overhead costs: P82,000

The number of direct labor hours used as normal activity are:

A.16,000C.14,000

B.15,000D.13,500

.Using the information presented below, calculate the total overhead spending variance.

Budgeted fixed overheadP10,000

Standard variable overhead (2 DLH at P2 per DLH)P4 per unit



Budgeted volume (5,000 units x 2 DLH)10,000 DLH

Actual direct labor hours (DLH) 9,500

Units produced4,500

A.P 500 UC.P1,000 U

B.P 800 UD.P1,300 U

.The following data are the actual results for Bustos Company for the month of May:

Actual output4,500 units



Actual machine time14,000 MH

Standard cost and budget information for Bustos Company follows:

Standard variable overhead rateP6.00 per MH

Standard quantity of machine hours3 hours per unit

Budgeted fixed overheadP777,600 per year

Budgeted output4,800 unit per month

The overhead efficiency variance is:

A.P3,000 FavorableC.P3,000 UnfavorableB.P5,400 FavorableD.P5,400 Unfavorable

.The following information is available from the Tyro Company:

Actual factory overheadP15,000

Fixed overhead expenses, actualP 7,200

Fixed overhead expenses, budgetedP 7,000

Actual hours3,500

Standard hours 3,800

Variable overhead rate per DLH P 2.50

Assuming that Tyro uses a three-way analysis of overhead variances, what is the spending variance?

A.P 750 FC.P 950 F

B.P 750 UD.P1,500 U

.The Sacto Co.s standard fixed overhead cost is P3 per direct labor hour based on budgeted fixed costs of P300,000. The standard allows 2 direct labor hours per unit. During 2006, Sacto produced 55,000 units of product, incurred P315,000 of fixed overhead costs, and recorded P106,000 actual hours of direct labor. What are the fixed overhead variances?

Spending varianceVolume varianceA. P15,000 UP30,000 F

B. P33,000 UP30,000 F

C. P15,000 UP18,000 F

D. P33,000 UP18,000 F

.Using the information in the preceding number, the amounts of controllable variances for variable overhead are:

SpendingEfficiencyA.P20,000 FavP20,000 Unf

B.P20,000 UnfP20,000 Fav

C.P 5,000 UnfP20,000 Unf

D.P20,000 FavP 5,000 Unf

Four-way overhead variance

.Safin Corporations master budget calls for the production of 5,000 units of product monthly. The annual master budget includes indirect labor of P144,000 annually. Safin 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 P10,100 were incurred. A performance report utilizing flexible budgeting would report a budget variance for indirect labor of:

A.P1,900 Unfavorable.C.P1,900 Favorable.

B.P 700 Unfavorable.D.P 700 Favorable.

.Wala Company applies overhead on a direct labor hour basis. Each unit of product requires 5 direct labor hours. Overhead is applied on a 30 percent variable and 70 percent fixed basis; the overhead application rate is P16 per hour. Standards are based on a normal monthly capacity of 5,000 direct labor hours.

During September 2006, Wala produced 1,010 units of product and incurred 4,900 direct labor hours. Actual overhead cost for the month was P80,000.

What is total annual budgeted fixed overhead cost?

A.P 56,000C.P672,000

B.P 56,560D.P678,720

.Budgeted variable overhead for the level of production achieved is 40,000 machine-hours at a budgeted cost of P62,000. Actual variable overhead at the level of production achieved was 38,000 hours at an actual cost of P62,400. What is the total variable overhead variance?

A.P400 favorableC.P3,100 unfavorable

B.P400 unfavorableD.P3,100 favorable

.The Pinatubo 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 @ P4.00 per DLH

Fixed factory overhead: 3.0 DLHs @ P3.50 per DLH

For January, the company incurred P22,000 of actual fixed overhead costs and recorded a P875 favorable volume variance.

The budgeted fixed overhead cost for January is:

A.P31,500C.P30,625

B.P32,375D.P33,250

.The variable-overhead spending variance is P1,080, unfavorable. Variable overhead budgeted at 40,000 machine hours is P50,000. Actual machine hours were 36,000. What was the actual variable-overhead rate per machine hour?

A.P1.28C.P1.39

B.P1.25D.P1.52

.Calvin Klein Company has a standard fixed cost of P6 per unit. At an actual production of 8,000 units a favorable volume variance of P12,000 resulted. What were total budgeted fixed costs?

A.P36,000.C.P48,000.

B.P60,000.D.P75,000.

.Puma Company had an 25,000 unfavorable volume variance, a P18,000 unfavorable variable overhead spending variance, and P2,000 total under applied overhead. The fixed overhead budget variance is



.Arlene had an P18,000 unfavorable volume variance, a P25,000 unfavorable variable overhead spending variance, and P2,000 total under applied overhead. The fixed overhead budget variance is:



.Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was P12,000 favorable and the fixed overhead spending variance was P16,000 unfavorable, fixed manufacturing overhead applied must be:

A.P516,000C.P512,000

B.P504,000D.P496,000

.CTV Company has a standard fixed cost of P6 per unit. At an actual production of 8,000 units a favorable volume variance of P12,000 resulted. What were total budgeted fixed costs?

A.P36,000C.P48,000

B.P60,000D.P75,000

.Richard Company employs a standard absorption system for product costing. The standard cost of its product is as follows:

Raw materialsP14.50

Direct labor (2 DLH x P8) 16.00

Manufacturing overhead (2 DLH x P11) 22.00Total standard costP52.50

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 P 3,600,000

Fixed 3,000,000 P 6,600,000During November, Richard produced 26,000 units. Richard used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P260,000 fixed and P315,000 variable. The total manufacturing overhead applied during November was P572,000.

The fixed manufacturing overhead volume variance for November is:



.Using the information for Richard Company in the preceding number, the total variance related to efficiency of the manufacturing operation for November is:

A.P 9,000 unfavorableC.P12,000 unfavorable


Question Nos. 65 and 66 are based on the following:Tiny Bubbles Company had the following activity relating to its fixed and variable overhead for the month of July.

Actual costsFixed overheadP120,000

Variable overhead 80,000

Flexible budget(Standard input allowed for actual output achieved x the budgeted rate)

Variable overheadP 90,000

Applied(Standard input allowed for actual output achieved x the budgeted rate)

Fixed overheadP125,000

Variable overhead spending variance 1,200 F

Production volume variance 5,000 U

.If the budgeted rate for applying variable manufacturing overhead was P20 per direct labor hour, how efficient or inefficient was Tiny Bubbles in terms of using direct labor hours as an activity base?

A.100 direct labor hours inefficientC.100 direct labor hours efficient

B.440 direct labor hours inefficientD.440 direct labor hours efficient

.The fixed overhead efficiency variance is:

A.P 3,000 favorableC.P 3,000 unfavorable

B.P10,000 unfavorableD.Never a meaningful variance

Questions 67 and 68 are based on a monthly normal volume of 50,000 units (100,000 direct labor hours). Raff Co.s standard cost system contains the following overhead costs:

VariableP6 per unit

Fixed P8 per unit

The following information pertains to the month of March:

Units actually produced38,000

Actual direct labor hours worked80,000

Actual overhead incurred:

VariableP250,000

Fixed 384,000

.For March, the unfavorable variable overhead spending variance was:

A.P6,000C.P12,000

B.P10,000D.P22,000

.For March, the fixed overhead volume variance was:

A.P96,000UC.P80,000U

B.P96,000FD.P80,000F

.Edney Company employs standard absorption system for product costing. The standard cost of its product is as follows:Raw materialsP14.50

Direct labor (2 DLH x P8) 16.00

Manufacturing overhead (2 DLH x P11) 22.00

The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Edney planned to produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is

VariableP3,600,000

Fixed 3,000,000

During November, Edney produced 26,000 units. Edney used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P260,000 fixed and P315,000 variable. The total manufacturing overhead applied during November was P572,000.

The variable manufacturing overhead variances for November are:

SpendingEfficiencyA.P9,000 unfavorableP3,000 unfavorable

B.P6,000 favorableP9,000 unfavorable

C.P4,000 unfavorableP1,000 favorable

D.P9,000 favorableP12,000 unfavorable

.The fixed manufacturing overhead variances for November are:

SpendingVolumeA.P10,000 favorableP10,000 favorable

B.P10,000 unfavorableP10,000 favorable

C.P 6,000 favorableP 3,000 unfavorable

D.P 4,000 unfavorableP22,000 favorable

The following information will be used to answer Question Nos. 71 through 74:Garch, Inc. analyzes manufacturing overhead in the production of its only one product, CD. The following set of information applies to the month of May, 2006:

BudgetedActual

Units produced40,00038,000

Variable manufacturing OHP 4/DLHP16,400

Fixed manufacturing overheadP20/DLHP88,000

Direct labor hours6 min/unit4,200 hr

.What is the fixed overhead spending variance?


B.P8,000 FavorableD.P4,000 Unfavorable

.What is the volume variance?

A.P4,000 FavorableC.P8,000 Favorable


.How much was the variable overhead spending variance?

A.P 400 FavorableC.P400 Unfavorable

B.P1,200 Favorable.D.P1,200 Unfavorable

.How much overhead efficiency variance resulted for the month of May?


B.P 800 FavorableD.P800 Unfavorable

Questions 75 through 78 are based on Darf Company, which applies overhead on the basis of direct labor hours. Two direct labor hours are required for each product unit. Planned production for the period was set at 9,000 units. Manufacturing overhead is budgeted at P135,000 for the period, of which 20% of this cost is fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was P108,500 and fixed manufacturing overhead cost was P28,000. Darf Company uses a four variance method for analyzing manufacturing overhead.

.The variable overhead spending variance for the period is



.The variable overhead efficiency variance (quantity) variance for the period is



.The fixed overhead budget (spending) variance for the period is



.The fixed overhead volume (denominator) variance for the period is

A.P 750 unfavorableC.P2,500 unfavorable


Comprehensive

.Big Marat, Inc. began operations on January 3. Standard costs were established in early January assuming a normal production volume of 160,000 units. However, Big Marat produced only 140,000 units of product and sold 100,000 units at a selling price of P180 per unit during the year. Variable costs totaled P7,000,000, of which 60% were manufacturing and 40% were selling. Fixed costs totaled P11,200,000, of which 50% were manufacturing and 50% were selling. Big Marat had no raw materials or work-in-process inventories at December 31. Actual input prices and quantities per unit of product were equal to standard.

Using absorption costing, Big Marats income statement would show:

A.B.C.D.

Cost of Goods Sold at Standard CostP8,200,000P7,200,000P6,500,000P7,000,000

Overhead Volume VarianceP800,000 UP800,000 FP700,000 UP700,000 F

Questions No. 80 through 85 are based on the following information:You have recently graduated from a university and have accepted a position with Villar Company, the manufacturer of a popular consumer product. During your first week on the job, the vice president has been favorably impressed with your work. She has been so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee meeting this morning for the purpose of leading a discussion on the variances reported for last period. Anxious to favorably impress the executive committee, you took the variances and supporting data home last night to study.

On your way to work this morning, the papers were laying on the seat of your new, red convertible. As you were crossing a bridge on the highway, a sudden gust of wind caught the papers and blew them over the edge of the bridge and into the stream below. You managed to retrieve only one page, which contains the following information:

Standard Cost Summary

Direct materials, 6 pounds at P3P18.00

Direct labor, 0.8 hours at P5 4.00

Variable overhead, 0.8 hours at P32.40

Fixed overhead, 0.8 hours at P75.60

P30.00

Total Standard CostV A R I A N C E S R E P O R T E D

Price or RateSpending or BudgetQuantity or EfficiencyVolume

Direct materialsP405,000P6,900 FP9,000 U

Direct labor 90,0004,850 U7,000 U

Variable overhead 54,000P1,300 F?@

Fixed overhead 126,000 500 FP14,000U

Applied to Work in process during the period

@ Figure obliterated.

You recall that manufacturing overhead cost is applied to production on the basis of direct labor-hours and that all of the materials purchased during the period were used in production. Since the company uses JIT to control work flows, work in process inventories are insignificant and can be ignored.

It is now 8:30 A.M. The executive committee meeting starts in just one hour; you realize that to avoid looking like a bungling fool you must somehow generate the necessary backup data for the variances before the meeting begins. Without backup data it will be impossible to lead the discussion or answer any questions.

.How many pounds of direct materials were purchased and used in the production of 22,500 units?

A.138,000 lbs.C.135,000 lbs.

B.132,000 lbs.D.137,300 lbs.

.What was the actual cost per pound of material?

A.P3.00C.P2.95

B.P3.05 D.P3.10

.How many actual direct labor hours were worked during the period?

A.18,000C.19,400

B.16,600D.18,970

.How much actual variable manufacturing overhead cost was incurred during the period?

A.P55,300C.P56,900

B.P58,200D.P59,500

.What is the total fixed manufacturing overhead cost in the companys flexible budget?

A.P112,500C.P139,500

B.P140,000D.P125,500

.What were the denominator hours for last period?

A.18,000 hoursC.20,000 hours

B.22,000 hoursD.25,000 hours

Productivity measures

Manufacturing cycle efficiency

.Fireout Company manufactures fire hydrants in Bulacan. The following information pertains to operations during the month of May:

Processing hours (average per batch)8.0

Inspection hours (average per batch)1.5

Waiting hours (average per batch)1.5

Move time (average per batch)1.5

Units per batch20 units

The manufacturing cycle efficiency (MCE) is:

A.72.7%C.64.0%

B.36.0%D.76.0%

Throughput time

.Choco Company manufactures fire hydrants in Bulacan. The following information pertains to operations during the month of May:

Processing time (average per batch)8.0 hours

Inspection time (average per batch)1.5 hours

Waiting time (average per batch)1.5 hours

Move time (average per batch)1.5 hours

Units per batch20 units

The throughput time is:

A.12.5 hoursC. 4.5 hours

B. 8.0 hoursD. 9.5 hours

Delivery cycle time

.Alabang Corporation is a highly automated manufacturing firm. The vice president of finance has decided that traditional standards are inappropriate for performance measures in an automated environment. Labor is insignificant in terms of the total cost of production and tends to be fixed, material quality is considered more important than minimizing material cost, and customer satisfaction is the number one priority. As a result, production and delivery performance measures have been chosen to evaluate performance. The following information is considered typical of the time involved to complete and ship orders.

Waiting Time:

From order being placed to start of production8.0 days

From start of production to completion7.0 days

Inspection time1.5 days

Processing time3.0 days

Move time2.5 days

The Delivery Cycle Time is:

A.22 daysC.14 days

B.11 daysD. 7 days

.Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was P12,000 favorable and the fixed overhead spending variance was P16,000 unfavorable, fixed manufacturing overhead applied must be

A.P516,000C.P512,000

B.P488,000D.P496,000

.Answer: D

Nyclyn (24 0.80 x P15) P 450.00

Salex (19.20 0.80 x P21) 504.00

Protet (10 x P28) 280.00

Total P1,234.00

.Answer: C

Required inputs to be placed in process per unit of product: 2.25 0.753.0 yards

Standard Material cost per unit of product: 3.0 x P150P450

.Answer: B

Required inputs of raw materials (in pounds) (60 0.80) 75.00

Standard price per pound (2.5 x 0.98)x 2.45

Standard materials cost per unit183.75

.Answer: D

Net price per yard:

Purchase price40.00

Freight 1.00

Purchase discount 0.03 x 40 ( 1.20)

Standard cost per yard39.80

Standard quantity per scarf0.475/0.95 0.50

Standard cost per scarf:0.50 x 39.8019.90

.Answer: C

Total Minutes per worker (8 hours x 60)480

Rest Time 60

Productive minutes420

Output per day per worker(420 35) in 10-liter batch12

Production hour good units35 min

Rest minutes (60 12) 5 min

Minutes used for rejects (35 + 5) 5 good units 8 min

Total standard minutes per 10-good liter batch48 Min

.Answer: B

Weekly wages per worker1,000

Fringe benefits (1,000 x 0.25) 250

Total weekly direct labor cost per worker 1,250

Labor cost per hour (1,250 40 hrs) 31.25

Labor cost per unit (31.25 x 2.50 hrs)P78.125

.Answer: D

Required number of quarts of berries (6 0.80)7.50

Cost of berries (7.50 @ P8.00)60

Cost of other ingredients (10 x 4.50)45

Standard materials cost per batch 105

.Answer: C

Minutes required by sorting good berries 6 quarts @ 3 min. 18

Minutes required by mixing 12

Total number of minutes30

Standard labor cost per batch (0.50 @ P50) P25

.Answer: A

Unit cost of materials: (Debit to Goods in Process + Debit to Materials Quantity Variance - Credit to Materials Price Variance)/Number of Units Completed

Total debits to work in process accountP51,690

Debit to materials quantity variance 1,970

Credit to materials price variance( 3,740)

Actual materials costP49,920

Per unit cost: P49,920/96,000 P0.52

.Answer: A

Actual quantity used1,066

Add favorable quantity (209/5.5) 38

Standard quantity allowed1,104

.Answer: C

Actual materials price105,000/35,0003.00

Standard Quantity 12,000 x 224,000

Standard price60,000/24,0002.50

Actual Quantity used:24,000 + (2,500/2.5)25,000

Price variance based on usage: 25,000 x (3 2.50)12,500

.Answer: D

Actual Quantity used14,910

Favorable Quantity 3,735/1.5 2,490

Standard Quantity allowed17,400

Production in units 17,400/15 1,160

.Answer: A

AQ @ SP (3,150 x 40)P126,000

SQ @ SP (600 x 5 x 40) 120,000

Unfavorable Quantity VarianceP 6,000

.Answer: A

Actual quantity used (pounds)23,500

Less: Excess pounds used (1,000 2) 500

Standard Quantity Allowed23,000

Alternative Solution using the formula for Usage Variance:

MUV = (AQ SQ)SP

1,000 = (23,500 SQ)2

1,000 2 = 23,500 SQ

500 = 23,500 SQ

SQ = 23,000

.Answer: D

Actual Purchase Costs (AQ x SP)

= 84,000 (30,000 x 3)6,000 Favorable

Standard Price = Usage Variance (AQ SQ)

3,000 (30,000 29,000) = P3

.Answer: B

The actual purchase price per unit can be conveniently solved by using the purchase price variance - MPV = AQ(AP-SP)

-240 = 1,600 (AP 3.60)

-240 1,600 = AP 3.60

0.15 = AP 3.60

AP = 3.45

.Answer: C

MPV = 1,400(1.10 1.00)

= 140

.Answer: A

MUV = (AQ SQ)SP

= (2,300 2,100) 6.25

= 1,250 Unfavorable

.Answer: C

Actual materials cost26,400

AQ @ SP (22,000 x 1.25)27,500

Favorable Price Variance( 1,100)

.Answer: A

Standard materials cost per batch (200 x 1) + (840 x 0.20) + (7 x 2) + (3 x 6)P400

Expected yield in batch (20,160 1,050)19.20

Actual yield 18.50

Unfavorable yield in batch 0.70

Unfavorable yield variance (0.70 x 400)P 280

.Answer: D

Materials

Actual cost127,500

Budgeted cost (8,500 @ 15)127,500

Materials cost variance 0

Labor

AH @ SR (6,375 @ 12) 76,500

SH @ SR (8,500 @ 0.75 @ 12) 76,500

Labor Efficiency Variance 0

Actual Payroll77,775

AH @ SR (6,375 @ 12)76,500

Labor Rate Variance 1,275

.Answer: C

(AR - SR) x AH = rate variance

Therefore, the total variance (P654.50) when divided by the hourly difference (P4.27 - P4.10) will equal the actual hours.

Actual hours (P654.50/P.17) = 3,850.

Proof: (P4.27 - P4.10) x 3,850 = P654.50

.Answer: A

LaborAHStd. Mix at AHDiffSRLabor Mix VarianceM4,5005,000(500)P10P (5,000)F3,0002,50050052,5007,5007,500-P (2,500)Fav

.Answer: A

Labor Yield Variance:

Expected Yield40,000

Actual Yield36,000

Difference 4,000

Multiply by Standard labor cost per unit P1.5625*

Yield VarianceP6,250U

*Standard cost Standard Yield = P6,250 4,000 = P1.5625

.Answer: C

Direct labor cost at standard rate7,150 7506,400

Standard rate6,400/800 8.00

.Answer: A

Actual cost10,000

Favorable Rate Variance 1,000

Actual hours @ standard rate11,000

Standard Rate: 11,000 2,0005.50

Expected yield (400,000 units / 750 hrs) 7,500 = 40,000

.Answer: C

LEV: (20,000 21,000)6.15 = (6,150)F

Standard Rate:

3,000 = 126,000 20,000SR

123,000 = 20,000SR

SR = 6.15

.Answer: C

LEV: (410 x 20) 8,440 = (240)F

.Answer: C

Actual hours1,148,000/16.4070,000

Less Unfavorable hours120,000/16 7,500

Standard hours allowed62,500

Standard rate: 960,000/60,00016.00

.Answer: B

SR = LEV (AH SH)

= -4,000 (29,000 30,000)

= P4.00

.Answer: C

AR = SR (LRV AH)

AR = P4.00 (5,800 29,000)

= P3.80

.Answer: B

Variable OH rate/hr - P27,000 45,000 P 0.60

Direct labor rate/hr = P0.60 0.20P 3.00

Variable OH is applied at 20% of direct labor cost

Actual hours P140,700 (P3 P0.20) 50,250

Unfavorable hours P5,100 P3 1,700

SH allowed 48,550

.Answer: B

Actual direct labor costs P241,500

Actual hrs at std labor rate (34,500 x P6.4) 220,800

Unfavorable labor rate variance P 20,700

Standard labor rate:

-3,200 = (34,500 35,000) SR

3,200 = 500SR

SR = 6.40

.Answer: B

Actual hours = Labor rate variance (AR-SR)

P12,000 (P10 P9) 12,000 hours

.Answer: D

LRV = AH(AR SR)

-5,500 = 10,000(7.50 SR)

-5,500 10,000 = 7.5 SR

-0.55 = 7.50 SR

SR = 8.05

.Answer: D

The controllable variance is the sum of the spending variances plus the efficiency variance.

Variable overhead spending varianceP( 3,600)

Fixed overhead spending variance P(10,000)

Variable overhead efficiency variance P 6,000

Total controllable varianceP 7,600

The volume variance is not considered a controllable variance.

.Answer: A

Monthly budgeted fixed overhead (150,000/12)12,500

Applied fixed overhead (2,450 x 2 x 2.5)12,250

Unfavorable volume variance 250

.Answer: A

Variable OH per DLH 48,000/24,0002.00

Actual overhead147,000

Budgeted OH at standard hours:

Variable 21,000 x 242,000

Fixed 108,000150,000

Favorable controllable/budget variance( 3,000)

.Answer: A

Budgeted fixed overhead81,000

Applied fixed overhead based on 80% achieved (24,000 x 3)72,000

Unfavorable volume variance 9,000

Fixed overhead rate based on 27,000 hours: (81,000 27,000)3.00

.Answer: D


Less Budgeted OH at standard hours

Variable32,000 x 5160,000

Fixed 64,000 (224,000)

Unfavorable budget variance 6,000

.Answer: C


Budget at SH15,600

Favorable controllable variance ( 1,600)

.Answer: C

OH application rate based on DL cost 600,000/(50,000 x 6)200%

Applied overhead 325,000 x 2650,000


Overapplied Overhead 30,000

.Answer: D


Budget at standard hours:

Fixed OH64,000

Variable OH (32,000 x 5) 160,000224,000

Unfavorable controllable variance 6,000

.Answer: B

Budgeted fixed overhead (30,000 x 2)60,000

Applied FOH (25,000 x 2)50,000

Unfavorable volume variance10,000

.Answer: C

Efficiency variance = (AH SH) x SVOHR (14,000 13,500) 6 = 3,000 UNF

Standard hours: 4,500 x 313,500

.Answer: D

Efficiency Variance = (31,500 30,000) 1015,000 Unfavorable

Standard hours: 20,000 units x 1.5 hours

.Answer: A

Fixed overhead rate per hour8.50 6.00 2.50

Denominator hours (previous number) 40,000/2.516,000

.Answer: B

Actual OH (10,300 + 19,500) P29,800

Less: Budgeted OH at actual hours (P2 x 9,500 hrs) + P10,000 29,000

Unfavorable spending variance P 800

.Answer: C

EV = (AH SH) SVOHR (14,000 13,500) 63,000U

SH (4,500 x 3)13,500

.Answer: A

Actual OHP15,000

Budgeted OH at actual hours (3,500 x P2.50) + P7,000 15,750

Favorable spending varianceP( 750)

.Answer: A

Fixed OH spending variance:

Actual Fixed OH - Budgeted Fixed OH (P315,000 P300,000)P15,000 U

Fixed OH volume variance:

(Budgeted Units Actual Units) x SFOH rate (50,000 55,000) x P6 P(30,000)F

Budgeted production: P300,000 P3 2 hours

.Answer: A

Actual variable overhead520,000

AH @ SVOHR (270,000 x 2)540,000

Variable Oh spending variance, Favorable( 20,000)

AH @ SVOHR540,000

SH @ SVOH (260,000 x 2)520,000

Unfavorable VOH efficiency variance 20,000

.Answer: D

ActualP10,100

Budget (4,500 x 2.40) 10,800

Favorable Budget variance P( 700)

.Answer: C

Fixed overhead per hour: 16 x 0.711.20

Annual fixed OH budget 5,000 x 12 x 11.20672,000

.Answer: B


Variable OH applied62,000

Unfavorable variable OH variance 400

.Answer: C

Applied fixed overhead (3,000 x 3 x 3.50)31,500

Less: Favorable volume variance 875


.Answer: A

Standard rate: 50,000/40,0001.25

Excess rate 1,080/3,6000.03

Actual rate1.28

.Answer: A

Applied fixed overhead48,000

Less favorable volume variance12,000


.Answer: A

Unfavorable volume variance25,000

Unfavorable VOH spending variance18,000

Total43,000

Net Unfavorable variance 2,000

Favorable fixed OH budget variance41,000

.Answer: A

Net OH variance, Unfavorable 2,000

Less: Unfavorable volume variance( 18,000)

Unfavorable spending variance( 25,000)

Favorable FOH budget variance41,000

.Answer: C

Budgeted fixed OH500,000

Add: favorable volume variance 12,000


.Answer: A

Applied FOH (8,000 x 6)48,000

Less: Favorable volume variance12,000

Budgeted FOH36,000

.Answer: A

Budgeted fixed OH (3,000,000 12 months)250,000

Applied fixed OH (26,000 @ 2 x 5)260,000

Favorable volume variance ( 10,000)F

Fixed OH rate per hour (3,000,000 600,000) 5.00

.Answer: B

Labor Efficiency: (53,500 52,000) 812,000

Variable OH Efficiency (53,500 52,000) 6 9,000

Total efficiency variance21,000

.Answer: D

Total variable overhead variance (80,000 90,000)10,000 favorable

Variable overhead spending variance 1,200 favorable

Variable overhead efficiency variance 8,800 favorable

8,800 20 440 Favorable

.Answer: D

Fixed overhead volume variance is a more meaningful variance in evaluating the use of the capacity.

.Answer: B

Actual variable OH P250,000

Budgeted VOH at actual hours (80,000 x P3) 240,000

Unfavorable VOH spending variance P 10,000

.Answer: A

(38,000 units 50,000 units) x P8P96,000

.Answer: B

Spending [P315,000 (53,500 x P6)]P(6,000)

Efficiency [(53,500 52,000) x P6]P 9,000

.Answer: B

Spending [P260,000 (P3M 12)]P10,000U

Volume [(26,000 25,000) x P10]P10,000F

.Answer: C

Actual fixed overhead P88,000

Budget fixed overhead (4,000 hrs @ P20) 80,000

Unfavorable fixed OH Spending variance P 8,000

Budgeted (denominator) hours (40,000 units x 6 60) 4,000

.Answer: B

Budget fixed overheadP80,000

Applied fixed overhead (38,000 x 0.10 x P20) 76,000

Unfavorable volume varianceP 4,000

.Answer: A

Actual variable overheadP 16,400

Budget at actual hours (4,200 x P4) 16,800

Favorable variable OH spending varianceP ( 400)

.Answer: C

Unfavorable Efficiency Variance: (AH SH) SVOHR

(4,200 3,800) x P4 = 1,600 UNF

SH allowed (38,000 units x 1 10) = 3,800 hours

.Answer: A


Budgeted VOH at actual hours (17,200 x 6)103,200

Variable overhead spending variance, UNF 5,300

VOH rate per hour (135,000 x 0.80) 18,000 hoursP6.00

.Answer: C

The computation of variable overhead efficiency variance involves the comparison of the actual hours and standard hours allowed by actual production.

(17,200 17,000) x P61,200 UNF

Standard hours allowed: 8,500 x 217,000

.Answer: D

The amount of fixed overhead budget (spending) variance is calculated by subtracting from the actual fixed overhead the amount of budgeted fixed overhead.

Actual fixed overhead28,000

Budgeted fixed overhead (135,000 x 0.2)27,000

Unfavorable fixed overhead budget variance 1,000

.Answer: B

The amount of volume variance (denominator or over/underapplied fixed overhead variance) is calculated by comparing the budgeted fixed overhead and fixed overhead applied to production.

Budgeted fixed overhead (135,000 x 0.2)27,000

Applied fixed overhead (8,500 x 3)25,500

Underapplied (unfavorable) volume variance 1,500

Alternative calculation: (9,000 8,500) x 3 1,500

Fixed overhead per unit(27,000 9,000)3

.Answer: C

Std unit cost:

Variable (7,000,000 x 0.60) 140,000P30

Fixed OH (11,200,000 x 0.50) 160,000 35

Std unit costP65

CGS Std (100,000 x 65)6,500,000

OH Volume Variance: (160,000 140,000) x 35 P 700,000 UNF

.Answer: A

SQ allowed (22,500 x 6)135,000

Unfavorable usage variance 3,000

Actual quantity of materials138,000

.Answer: C

Actual quantity purchased and used at standard price (138,000 x 3)414,000

Favorable price variance 6,900

Actual Quantity @ Actual Price407,100

Actual Price (407,100 138,000)P2.95

.Answer: C

SH @ SR90,000

Efficiency Variance 7,000

AH @ SR97,000

Actual hours (97,000 5)19,400

.Answer: D

AH @ SR (19,400 x 3)58,200

Spending variance 1,300

Actual Variable Overhead59,500

.Answer: B

Applied Fixed OH126,000

Underapplied fixed overhead 14,000


.Answer: C

Denominator or Budgeted Hours: (140,000 7) = 20,000

.Answer: C

MCE = Value Added Hours Throughput Time

Processing hours8.00

Inspection hours1.50

Waiting time1.50

Move time1.50

Throughput time12.50

MCE (8.00 12.50) 64%

.Answer: A

.Answer: A

Delivery cycle time:

Total waiting time 15.00

Inspection time1.50

Processing time3.00

Move time2.50

Delivery Cycle Time 22.00

.Answer: C

A favorable volume variance arises when the applied fixed overhead is higher than the budgeted fixed overhead.


Favorable volume variance (overapplied) 12,000


1203

05 x05 standard costing & variance analysis

Documents

page standard costs

costs attainable

budgeted costs

historical costs

control costs c

standard cost system

standard hours

exception standard