MANAGEMENT ACCOUNTING II

PROBLEM SOLVING QUIZ

PROBLEMS: answer each question. Show your solutions

1. Astroboy Company manufactures a powerful cleaning solvent. The main ingredient in the solvent is a
raw material called Echol. Information concerning the purchase and use of Echol as follows:
- Purchase of Echol- Echol is purchased in 15-gallon containers at a cost of P115 per container. A
discount of 2% is offered by the supplier for payment within 10 days, and Astroboy company
takes all takes all the discounts. Shipping costs, which Astroboy company must pay, amount to
P130 for an average shipment of 100 15-gallon containers of Echol
- Use of Echol- the bill of materials calls for 7.6 quarts of Echol per bottle of cleaning solvent (each
gallon contains four quarts). About 5% of all Echol used is lost through spoilage or evaporation
(the 7.6 quarts above is the actual content per bottle). In addition, statistical analysis has shown
that every 41st bottle is rejected at final inspection because of contamination.

Required:
a. Compute the standard purchase price for one quart of Echol.
b. Compute the standard quantity of Echol (in quarts) per salable bottle of cleaning solvent.]

2. Paulo Company produces a chair that requires 5 yds. of material per unit. The standard price of one
yard of material is P7.50. During the month, 8,500 chairs were manufactured, using 43,700 yards at a
cost of P7.60.

Required:
Compute the material price variance, material usage variance and the Total material variance

3. A unit of product A requires 2 kilos of material B15 at a price of P5 per kilo. Ten units of Product A
were manufactured and 22 kilos of B15 was purchased and consumed. The actual price is P6 per kilo.

Required:
Compute the material price variance, material usage variance and the Total material variance

4. Dora the Explorer Company makes leather bags. Each bag should use 4 feet of leather (standard
quantity), and the standard price of leather is P6 per foot. During March, the company purchased 760
feet of leather costing P5.9 per foot and used the leather to produced 180 bags.

Required:
Compute the material price variance, material usage variance and the Total material variance
5. Paulo company produces lamps that require 2.25 standard hours per unit at an hourly rate of P15 per
hour. If 7,700 units required 19,250 hours at an hourly rate of P14.90 per hour.

Required:
Compute the Labor rate variance, Labor efficiency variance and the Total labor variance

6. At Mojacko Company, each leather bag requires 2.4 standard direct labor hours, and the standard
direct labor rate is P8.5 per hour. During March, 450 direct labor hours were used to make 180 bags
at an average pay rate of P9.2 per hour.

Required:
Compute the Labor rate variance, Labor efficiency variance and the Total labor variance

7. The standard labor cost of one unit of a manufactured product of Kuruchan company indicated 4
hours @ P7/hour rate. The actual data for the month of March shows that 10,000 units of products
were manufactured and 39,000 direct labor hours were used. Total payroll during the month of
March is P265,200.

Required:
Compute the Labor rate variance, Labor efficiency variance and the Total labor variance.

8. A manufacturing Company is expected to complete a task in 45 minutes. During a recent accounting

period, 3,200 completed units were produced, resulting in the following labor variances:
Labor rate variance P520 favorable
Labor efficiency variance P2,800 unfavorable
standard labor rate per hour P14

Required:
Calculate the standard hours allowed for the work performed, the actual hours worked, and the actual
wage rate.