PART 1 PROBLEMS (DIFFICULTY LEVEL: EASY 2 points each)

PROBLEM 1
The following March information is available for ABC Manufacturing Company when it
produced 2,100 units:

Standard:
Material 2 pounds per unit @ P5.80 per pound
Labor 3 direct labor hours per unit @ P10.00 per hour

Actual:
Material 4,250 pounds purchased and used @ P5.65 per pound
Labor 6,300 direct labor hours at P9.75 per hour

1. Refer to ABC Manufacturing. What is the material price variance?

a. P637.50 U
b. P637.50 F
c. P630.00 U
d. P630.00 F

2. Refer to ABC Manufacturing. What is the material quantity variance?

a. P275 F
b. P290 F
c. P290 U
d. P275 U

3. Refer to ABC Manufacturing. What is the labor rate variance?

a. P1,575 U
b. P1,575 F
c. P1,594 U
d. P0

4. Refer to ABC Manufacturing. What is the labor efficiency variance?

a. P731.25 F
b. P731.25 U
c. P750.00 F
d. none of the answers are correct

PROBLEM 2
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

5. 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

6. 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

PROBLEM 3
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

7. What is the labor rate variance for the month?

a. P1,920 F
b. P240 U
c. P1,920 U
d. P240 F

8. 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
PROBLEM 4
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

9. The labor rate variance for April is:

a. P3,760 U.
b. P3,760 F.
c. P2,850 F.
d. P2,850 U.

PART 2 (DIFFICULTY LEVEL: MODERATE 3 points each)

ABC Company has developed standard overhead costs based on a capacity of 180,000 machine
hours as follows:

Standard costs per

unit:
Variable portion 2 hours @ P3 = P 6
Fixed portion 2 hours @ P5 = 10
P16

During April, 85,000 units were scheduled for production, but only 80,000 units were actually
produced. The following data relate to April:

Actual machine hours used were 165,000.

Actual overhead incurred totaled P1,378,000 (P518,000 variable plus P860,000 fixed).
All inventories are carried at standard cost.

1. Refer to ABC Company. The variable overhead spending variance for April was
a. P15,000 U.
b. P23,000 U.
c. P38,000 F.
d. P38,000 U.

2. Refer to ABC Company. The variable overhead efficiency variance for April was
a. P15,000 U.
b. P23,000 U.
c. P38,000 F.
d. P38,000 U.
3. Refer to ABC Company. The fixed overhead spending variance for April was
a. P40,000 U.
b. P40,000 F.
c. P60,000 F.
d. P60,000 U.

4. Refer to ABC Company. The fixed overhead volume variance for April was
a. P60,000 U.
b. P60,000 F.
c. P100,000 F.
d. P100,000 U.

PART 3 PROBLEMS (DIFFICULTY LEVEL: HARD 4 points each)

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 P3 P18.00
Direct labor, 0.8 hours at P5 4.00
Variable overhead, 0.8 hours at P3 2.40
Fixed overhead, 0.8 hours at P7 5.60
P30.00
Total VARIANCES REPORTED
Standard Price Spending Quantity Volume
Cost or or
Rate Efficienc
y
Direct P405,000 P6,900 P9,000 U
materials F
Direct labor 90,000 4,850 7,000 U
U
Variable 54,000 P1,300 F ?@
overhead
Fixed 126,000 500 F P14,000U
overhead
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.
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.
1. 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.

2. What was the actual cost per pound of material?

A. P3.00 C. P2.95
B. P3.05 D. P3.10

3. How many actual direct labor hours were worked during the period?
A. 18,000 C. 19,400
B. 16,600 D. 18,970

4. What was the actual cost per direct labor hour?

A. P5.00 C. P4.75
B. P5.25 D. P4.65

5. How much actual variable manufacturing overhead cost was incurred during the period?
A. P55,300 C. P56,900
B. P58,200 D. P59,500

6. What is the total fixed manufacturing overhead cost in the company’s budget?
A. P112,500 C. P139,500
B. P140,000 D. P125,500

7. What were the budgeted hours for last period?

A. 18,000 hours C. 20,000 hours
B. 22,000 hours D. 25,000 hours

8. What is the Variable Efficiency Variance?

A. 4200 F C. zero
B. 4200 UF D. 2400 UF

9. How much actual fixed manufacturing overhead cost was incurred during the period?
A. 135,000 C. 140,000
B. 153,000 D. 139,500

10. What were the standard hours for last period?

A. 18,000 hours C. 20,000 hours
B. 22,000 hours D. 25,000 hours

PART 4 OPERATIONS MANAGEMENT (THEORY-ESSAY)

1. Choose three factors of Differentiation of goods and services and explain. (15 points)
For example:
Uniformity of Input
Goods- when it comes to sale of goods the uniformity of output is high specially when machines
are involved in manufacturing the goods, goods sold are manufactured at the same time and
they follow the same set of procedures in manufacturing the said goods.
Services-uniformity of output in services are low, for example in a salon wherein there are 2 or
more employees, the quality imposed by the management is the same for all employees but
the outcome of their service to clients might differ because the employees might have different
level of skill.

2. Choose two ethical issues and give an example on how this issues are being solved or
give your own solution to those issues. (10 points)
For example: Financial Issues- financial issues can be lessened by letting the companies’
Financial Statements be audited, it may not solve the financial issue entirely but the fact that
the financial statements are audited means that the Financial Statement can be relied upon by
the intended users (Government, Shareholders, Investors and other intended users).

3. What do you think is the importance of operations management in a business

organization? (5 points)

BONUS QUESTION

As a future accountant what do you think will be your contribution in the operations of
the management or how can the accounting department help the management with
their operations? (10 points)