ACCA107 – Strategic Cost Management

Overhead Variance Quiz

October 25, 2021

1.

Lewis Corporation manufactures industrial-sized water coolers and uses budgeted machine-
hours to allocate variable manufacturing overhead. The following information pertains to the
company's manufacturing overhead data:

Budgeted output units 15,000 units

Budgeted machine-hours 5,000 hours
Budgeted variable manufacturing overhead costs for 15,000 units P161,250

Actual output units produced 22,000 units

Actual machine-hours used 7,200 hours
Actual variable manufacturing overhead costs P242,000

What is the budgeted variable overhead cost at standard hours?

a. P165,000
b. P236,500*
c. P242,000
ANS B
 ACCA107 – Strategic Cost Management
Overhead Variance Quiz
October 25, 2021
2.

Pink Corporation manufactures football jerseys and uses budgeted machine-hours to allocate
variable manufacturing overhead. The following information pertains to the company's
manufacturing overhead data:

Budgeted output units 20,000 units

Budgeted machine-hours 30,000 hours
Budgeted variable manufacturing overhead costs for 20,000 units P360,000

Actual output units produced 18,000 units

Actual machine-hours used 28,000 hours
Actual variable manufacturing overhead costs P342,000

What is the total variable overhead variance?

a. P6,000 favorable
b. P6,000 unfavorable
c. P18,000 favorable
d. P18,000 unfavorable *
ANS D

3.
RP Corporation manufactured 1,500 chairs during June. The following variable overhead
data pertain to June:
Budgeted variable overhead cost per unit P 12.00
Actual variable manufacturing overhead cost P16,800
Applied variable manufacturing overhead P18,000
Variable manufacturing overhead efficiency variance P360 unfavorable

What is the variable overhead spending variance?

a. P840 unfavorable
b. P1,200 favorable
c. P1,200 unfavorable
d. P1,560 favorable*

ANS D
 ACCA107 – Strategic Cost Management
Overhead Variance Quiz
October 25, 2021

4.
LF Company employs a standard absorption system for product costing. The standard
cost of its product is as follows:

Direct materials ....................................................................................... P14.50

Direct labor (2 direct labor hours x P8) .................................................. 16.00
Manufacturing overhead (2 direct labor hours x P11) ........................... 22.00
Total standard cost ................................................................................. P52.50

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

Variable................................................................................................... P3,600,000
Fixed ....................................................................................................... 3,000,000
P6,600,000

During November, LF Company produced 26,000 units. LF Company used 53,500

direct labor hours in November at a cost of P433,350. Actual manufacturing
overhead for the month was P250,000 fixed and P325,000 variable.

The manufacturing overhead volume variance for November is:

a. P12,000 unfavorable
b. P12,000 favorable
c. P 10,000 unfavorable
d. P10,000 favorable*
e. P 1,000 favorable

ANS D
 ACCA107 – Strategic Cost Management
Overhead Variance Quiz
October 25, 2021

5.
Hope Company makes cologne called Allure. The standard cost for one bottle of Allure
is as follows

Cost Elements Quantity Price Cost

Direct materials 6 oz P0.90 P5.40
Direct labor 0.5 hrs 12.00 6.00
Overhead 0.5 hrs 4.80 2.4

During the month, the following transactions occurred in manufacturing 10,000 bottles of
Allure.
1) 58,000 ounces of materials were purchased at P1.00 per ounce.
2) All the materials purchased were used to produce 10,000 bottles of Allure.
3) 4,900 direct labor hours were worked at a total labor cost of P56,350.
4) Variable manufacturing overhead incurred was P15,0000 and fixed overhead incurred
was P10,400.

The manufacturing overhead rate of P4.80 is based on a normal capacity of 5,200 direct
labor hours. The total budget at this capacity is P10,400 fixed and P14,560 variable
(P2.80 per labor hour).

The controllable variance using two-variance analysis is

a. P1,000 U*
b. P1,000 F
c. P400 U
d. P400 F

ANS A
 ACCA107 – Strategic Cost Management
Overhead Variance Quiz
October 25, 2021

6. The total variable overhead (flexible-budget) variance can be further subdivided into the:
a. price variance and the efficiency variance
b. static-budget variance and sales-volume variance
c. spending variance and the efficiency variance*
d. sales-volume variance and the spending variance
ANS C
7. An unfavorable variable overhead spending variance indicates that:
a. variable overhead items were not used efficiently
b. the price of variable overhead items was more than budgeted *
c. the variable overhead cost-allocation base was not used efficiently
d. the denominator level was not accurately determined
ANS B

8. For variable manufacturing overhead, there is no:

a. spending variance
b. efficiency variance
c. flexible-budget variance
d. production-volume variance *

Ans D
9. The fixed overhead cost variance can be further subdivided into the:
a. price variance and the efficiency variance
b. spending variance and budget variance
c. production-volume variance and the efficiency variance
d. spending variance and the production-volume variance*

ANS D

10. An unfavorable production-volume variance of P40,000 indicates that the company has:
a. unused fixed manufacturing overhead capacity*
b. overallocated P40,000 of fixed manufacturing overhead costs
c. P40,000 more capacity than needed
d. an economic loss of P40,000 from selling fewer products than planned

ANS A
END