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05 x05 Standard Costing - Variance Analysis
05 x05 Standard Costing - Variance Analysis
203
Standard Costs and Variance Analysis
D. The standard equivalent units are multiplied by the actual cost per unit. A. Total overhead application rate
B. Volume of total expenses at various activity levels
Normal costing C. Variable overhead application rate
11. The fixed overhead application rate is a function of a predetermined “normal” activity level. If D. Fixed overhead application rate
standard hours allowed for good output equal this predetermined activity level for a given
period, the volume variance will be 17. Assuming that the standard fixed overhead rate is based on full capacity, the cost of available
A. Zero but unused productive capacity is indicated by the:
B. Favorable A. Factory overhead cost volume variance
C. Unfavorable B. Direct labor cost efficiency variance
D. Either favorable or unfavorable, depending on the budgeted overhead. C. Direct labor cost rate variance
D. Factory overhead cost controllable variance
Types of standards
12. The absolute minimum cost possible under the best conceivable operating conditions is a 18. In analyzing manufacturing overhead variances, the volume variance is the difference between
description of which type of standard? the:
A. Currently attainable (expected) C. Theoretical A. Amount shown in the flexible budget and the amount shown in the debit side of the
B. Normal D. Practical overhead control account
B. Predetermined overhead application rate and the flexible budget application rate times
13. Standards, which are difficult to achieve due to reasons beyond the individual performing the actual hours worked
task, are the result of firm using which of the following methods to establish standards? C. Budget allowance based on standard hours allowed for actual production for the period
A. Ideal Standards C. Practical Standards and the amount budgeted to be applied during the period
B. Lax Standards D. Employee Standards D. Actual amount spent for overhead items during the period and the overhead amount
applied to production during the period
14. Standards that represent levels of operation that can be attained with reasonable effort are
called: 19. The variance least significant for purposes of controlling costs is the:
A. Theoretical standards C. Variable standards A. Material usage variance
B. Ideal standards D. Normal standards B. Variable overhead efficiency variance
C. Fixed overhead spending variance
Variances D. Fixed overhead volume variance
Generic variances
15. When performing input/output variance analysis in standard costing, “standard hours allowed” 20. The variance most useful in evaluating plant utilization is the:
is a means of measuring A. Variable overhead spending variance
A. Standard output at standard hours C. Actual output at standard hours B. Fixed overhead spending variance.
B. Standard output at actual hours D. Actual output at actual hours C. Variable overhead efficiency variance
D. Fixed overhead volume variance
Two way variances
Volume variance Four way variances
16. A company uses a two-way analysis for overhead variances: budget (controllable) and 21. The choice of production volume as a denominator for calculating its factory overhead rate
volume. The volume variance is based on the A. Has no effect on the fixed factory overhead rate for applying costs to production
204
Standard Costs and Variance Analysis
B. Has an effect on the variable factory overhead rate for applying costs to production position of a production process on a learning curve?
C. Has no effect on the fixed factory overhead budget variance A. Materials mix C. Labor rate
D. Has no effect on the fixed factory overhead production volume variance B. Materials price D. Labor efficiency
22. The budgeted overhead costs for standard hours allowed and the overhead costs applied to 27. Which of the following is the most probable reason with a company would experience an
product are the same amount unfavorable labor rate variance and a favorable labor efficiency variance?
A. for both variable and fixed overhead costs. A. The mix of workers assigned to the particular job was heavily weighted toward the use of
B. only when standard hours allowed is less than normal capacity. higherly paid, experienced individuals.
C. for variable overhead costs. B. The mix of workers assigned to the particular job was heavily weighted toward the use of
D. for fixed overhead costs. new, relatively low paid, unskilled workers.
C. Because of the productive schedule, workers from other production areas were assigned
Responsibility for variances to assist in this particular process.
23. Which department is customarily held responsible for an unfavorable materials usage D. Defective materials caused more labor to be used in order to produce a standard unit.
variance?
A. Quality control C. Purchasing Two-way overhead variance
B. Engineering D. Production 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
Variance analysis done a better than expected job in controlling the cost if:
24. Which of the following should be least considered when deciding whether to investigate a A. The cost is variable and actual production was 90% of budgeted production
variance? B. The cost is variable and actual production equaled budgeted production
A. Whether the variance is favorable or unfavorable C. The cost is variable and actual production was 80% of budgeted production
B. Significance of the variance D. The cost is discretionary fixed cost and actual production equaled budgeted production
C. Cost of investigating the variance
D. Trend of the variances over time Budget variance
29. The budget variance for fixed factory overhead for the normal-volume, practical-capacity, and
Total materials variance expected-activity levels would be the:
25. If the total materials variance (actual cost of materials used compared with the standard cost A. Same except for normal volume C. Same except for expected activity
of the standard amount of materials required) for a given operation is favorable, why must this B. Same except for practical capacity D. Same for all three activity levels
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 Volume variance
B. Generally accepted accounting principles require that all variances be analyzed in three 30. You have leased a 5,000-gallon storage tank for P5,000 per month. You stored 4,000 gallons
stages of liquid in the tank during the month. The cost of storage was P1.25 per gallon, rather than
C. All variances must appear in the annual report to equity owners for proper disclosure P1.00 per gallon based on 5,000 gallon capacity. Therefore, the cost of storing 4,000 gallons
D. To allow management to evaluate the efficiency of the purchasing and production was P1,000 more (P.25 x 4,000) in total than if you had stored 5,000 gallons of liquid in the
functions tank. Which variance is being described?
A. Variable-overhead efficiency variance
Labor variances B. Fixed-overhead spending variance
26. Which of the following unfavorable cost variances would be directly affected by the relative C. Variable-overhead spending variance
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Standard Costs and Variance Analysis
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Standard Costs and Variance Analysis
B. P183.75 D. P176.40 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?
.
4
The Vandana Company has a signature scarf for ladies that is very popular. Certain A. 35 minutes C. 48 minutes
production and marketing data are indicated below: B. 40 minutes D. 45 minutes
Cost per yard of cloth P40.00
Allowance for rejected scarf 5% of production .
6
The following direct labor information pertains to the manufacture of Part J35:
Yards of cloth needed per scarf 0.475 yard Number of hours required to make a part 2.5 DLH
Airfreight from supplier P1.00/yard Number of Direct workers 75
Motor freight to customers P0.90 /scarf Number of total productive hours per week 3000
Purchase discounts from supplier 3% Weekly wages per worker P1,000
Sales discount to customers 2% Laborers’ fringe benefits treated as direct labor costs 25% of wages
The allowance for rejected scarf is not part of the 0.475 yard of cloth per scarf. Rejects have What is the standard direct labor cost per unit of Part J35?
no market value. Materials are used at the start of production. A. P62.500 C. P41.670
Calculate the standard cost of cloth per scarf that Vandana Company should use in its cost B. P78.125 D. P84.125
sheets.
A. P19.85 C. P19.40 Materials & Labor
B. P20.00 D. P19.90 Questions Nos. 7 and 8 are based on the following:
Supercold Company is a small producer of fruit-flavored frozen desserts. For many years,
Direct labor Supercold’s products have had strong regional sales on the basis of brand recognition. However,
5
. Double M company is a chemical manufacturer that supplies various products to industrial other companies have begun marketing similar products in the area, and price competition has
users. The company plans to introduce a new chemical solution called Bysap, for which it become increasingly important. Haydee Mejia, the company’s controller, is planning to implement
needs to develop a standard product cost. The following labor information is available on the a standard costing system for Supercold and has gathered considerable information on production
production of Bysap. and material requirements for Supercold’s products. Haydee believes that the use of standard
The product, which is bottled in 10-liter containers, is primarily a mixture of Byclyn, costing will allow Supercold to improve cost control and make better pricing decisions.
Salex, and Protet.
The finished product is highly unstable, and one 10-liter batch out of six is rejected at Supercold’s most popular products is strawberry sherbet. The sherbet is produced in 10-gallon
final inspection. Rejected batches have no commercial value and are thrown out. batches, and each batch requires six quarts of good strawberries. The fresh strawberries are
It takes a worker 35 minutes to process one 10-liter batch of Bysap. Employees work 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
5
. Answer: C acceptable berries. Three minutes is the standard direct labor time for sorting that is required to
Total Minutes per worker (8 hours x 60) 480 obtain one quart of acceptable berries. The acceptable berries are then blended with the other
Rest Time 60 ingredients; blending requires 12 minutes of direct labor time per batch. After blending, the sherbet
Productive minutes 420 is package in quart containers. Haydee has gathered the following information from Rizza Alano,
Output per day per worker (420 ÷ 35) in 10-liter batch 12 Supercold’s cost accountant.
Production hour – good units 35 min
Rest minutes (60 ÷ 12) 5 min Supercold purchases strawberries at a cost of P8.00 per quart. All other ingredients cost a total of
Minutes used for rejects (35 + 5) ÷ 5 good units 8 min P4.50 per gallon.
Total standard minutes per 10-good liter batch 48 Min Direct labor is paid at the rate of P50 per hour.
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Standard Costs and Variance Analysis
The total cost of material and labor required to package the sherbet is P3.80 per quart. . Sheridan Company has a standard of 15 parts of component BB costing P1.50 each.
12
Sheridan purchased 14,910 units of component BB for P22,145. Sheridan generated a P220
Rizza Alano has a friend who owns a berry farm that has been losing money in recent years. favorable price variance and a P3,735 favorable quantity variance. If there were no changes
Because of good crops, there has been an oversupply of strawberries, and prices have dropped to in the component inventory, how many units of finished product were produced?
P5.00 per quart. Rizza has arranged for Supercold to purchase strawberries form her friend and A. 994 units. C. 1,000 units
hopes that P8.00 per quart will help her friend’s farm become profitable again. B. 1,090 units. D. 1,160 units
.
7
The standard materials cost per 10-gallon batch of strawberry sherbet is: . The standard usage for raw materials is 5 pounds at P40.00 per pound. Cave Company spent
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A. P 85.00 C. P101.00 P131,200 in purchasing 3,200 pounds. Cave used 3,150 pounds to produce 600 units of
B. P 60.00 D. P105.00 finished product. The material quantity variance is:
A. P6,000 unfavorable C. P3,200 unfavorable
.
8
The standard direct labor cost per 10-gallon batch of sherbet is: B. P5,200 unfavorable D. P2,000 unfavorable
A. P50.00 C. P25.00
B. P28.75 D. P15.00 . The Bohol Company uses standard costing. The following data are available for October:
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material are required to produce one unit of final product. In November, the company Standard unit price P 3.60
produced 12,000 units of product. The standard allowed for material was P60,000, and there Actual quantity purchased 1,600
was an unfavorable quantity variance of P2,500. The materials price variance for the units Standard quantity allowed for actual production 1,450
used in November was Materials purchase price variance – favorable P 240
A. P 2,500 U C. P12,500 U What was the actual purchase price per unit, rounded to the nearest centavos?
B. P11,000 U D. P 3,500 F A. P3.06 C. P3.11
B. P3.45 D. P3.75
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Standard Costs and Variance Analysis
actual rate was P4.27. The labor rate variance was P654.50, unfavorable. What were the
. Samson Candle Co. manufactures candles in various shapes, sizes, colors, and
20
actual labor hours?
scents. Depending on the orders received, not all candles require the same A. 3,700 C. 3,850
amount of color, dye, or scent materials. Yields also vary, depending upon B. 4,150 D. 4,000
the usage of beeswax or synthetic wax. Standard ingredients for 1,000 pounds
of candles are: . Clean Harry Corp. uses two different types of labor to manufacture its product. The types of
23
Input: Standard Mix Standard Cost per Pound labor, Mixing and Finishing, have the following standards:
Beeswax 200 lbs. 1.00 Labor Type Standard Mix Std Hourly Rate Standard Cost
Synthetic wax 840 lbs. 0.20 Mixing 500 hours P10 P5,000
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Standard Costs and Variance Analysis
hour level, with budgeted direct labor of P960,000 and budgeted variable overhead of
. How much labor yield variances should be reported?
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P240,000. The actual results revealed that direct labor incurred amounted to P1,148,000 and
A. P6,250 U C. P5,250 F
that the unfavorable variable overhead variance was P40,000. Labor trouble caused an
B. P6,250 F D. P5,250 U
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
. Hingis had a P750 unfavorable direct labor rate variance and an P800 favorable efficiency
25
direct labor hours allowed for the actual units produced is
variance. Hingis paid P7,150 for 800 hours of labor. What was the standard direct labor
A. P52,500 C. P62,500
wage rate?
B. P77,500 D. P70,000
A. P8.94 C. P8.00
B. P7.94 D. P7.80
Questions 30 and 31 are based on the following information.
Information on Goodeve Company’s direct labor costs are presented below:
. Powerless Company’s operations for April disclosed the following data relating to direct labor:
26
Standard direct labor hours 30,000
Actual cost P10,000
Actual direct labor hours 29,000
Rate variance 1,000 favorable
Direct labor efficiency variance Favorable P 4,000
Efficiency variance 1,500 unfavorable
Direct labor rate variance Favorable P 5,800
Standard cost P 9,500
Total payroll P110,200
Actual direct labor hours for April amounted to 2,000. Powerless’ standard direct labor rate per
hour in April was:
. What was Goodeve’s standard direct labor rate?
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A. P5.50 C. P5.00
A. P3.54 C. P3.80
B. P4.75 D. P4.50
B. P4.00 D. P5.80
. Lion Company’s direct labor costs for the month of January were as follows:
27
. What was Goodeve’s actual direct labor rate?
31
Actual direct labor hours 20,000
A. P3.60 C. P3.80
Standard direct labor hours 21,000
B. P4.00 D. P5.80
Direct labor rate variance – Unfav. P 3,000
Total payroll P126,000
. The Islander Corporation makes a variety of leather goods. It uses standards costs and a
32
What was Lion’s direct labor efficiency variance?
flexible budget to aid planning and control. Budgeted variable overhead at a 45,000-direct
A. P6,000 favorable C. P6,150 favorable
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Standard Costs and Variance Analysis
Actual direct labor hours 34,500 . Kent Company sets the following standards for 2007:
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Standard direct labor hours 35,000 Direct labor cost (2 DLH @ P4.50) P 9.00
Total direct labor payroll P241,500 Manufacturing overhead (2 DLH @ P7.50) 15.00
Direct labor efficiency variance – favorable P 3,200 Kent Company plans to produce its only product equally each month. The annual budget for
What is Barber’s direct labor rate variance? overhead costs are:
A. P17,250 U C. P21,000 U Fixed overhead P150,000
B. P20,700 U D. P21,000 F Variable overhead 300,000
Normal activity in direct labor hours 60,000
. STA Company uses a standard cost system. The following information pertains to direct labor
34
In March, Kent Company produced 2,450 units with actual direct labor hours used of 5,050.
costs for the month of June: Actual overhead costs for the month amounted to P37,245 (Fixed overhead is as budgeted.)
Standard direct labor rate per hour P 10.00 The amount of overhead volume variance for Kent Company is
Actual direct labor rate per hour P 9.00 A. P250 unfavorable C. P500 unfavorable
Labor rate variance (favorable) P12,000 B. P750 Unfavorable D. P375 Unfavorable
Actual output (units) 2,000
Standard hours allowed for actual production 10,000 hours . Calma Company uses a standard cost system. The following budget, at normal capacity, and
38
How many actual labor hours were worked during March for STA Company? the actual results are summarized for the month of December:
A. 10,000 C. 8,000 Direct labor hours 24,000
B. 12,000 D. 10,500 Variable factory OH P 48,000
Fixed factory OH P108,000
. Information of Hanes’ direct labor costs for the month of May is as follows:
35
Total factory OH per DLH P 6.50
Actual direct labor rate P7.50 Actual data for December were as follows:
Standard direct labor hours allowed 11,000 Direct labor hours worked 22,000
Actual direct labor hours 10,000 Total factory OH P147,000
Direct labor rate variance – favorable P5,500 Standard DLHs allowed for capacity attained 21,000
What was the standard direct labor rate in effect for the month of May? Using the two-way analysis of overhead variance, what is the controllable variance for
A. P6.95 C. P8.00 December?
B. P7.00 D. P8.05 A. P 3,000 Favorable C. P 5,000 Favorable
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Standard Costs and Variance Analysis
for the year: way analysis of overhead variances. Selected data for the June production activity are:
Percent of Capacity 80 Percent 90 Percent Budgeted fixed factory overhead costs P 64,000
Direct labor hours 24,000 27,000 Actual factory overhead 230,000
Variable factory overhead P 54,000 P 60,750 Variable factory overhead rater per DLH P 5
Fixed factory overhead P 81,000 P 81,000 Standard DLH 32,000
Total factory overhead rate per DLH P5.625 P5.25 Actual DLH 32,000
Heart operated at 80 percent of capacity during the year, but applied factory overhead based The budget (controllable) variance for June is
on the 90 percent capacity level. Assuming that actual factory overhead was equal to the A. P1,000 favorable C. P1,000 unfavorable
budgeted amount of overhead, how much was the overhead volume variance for the year? B. P6,000 favorable D. P6,000 unfavorable
A. P 9,000 unfavorable C. P 9,000 favorable
. Sorsogon Company had actual overhead of P14,000 for the year. The company applied
41
1 overhead of P13,400. If the overhead budgeted for the standard hours allowed is P15,600, the
. Answer: D overhead controllable variance is
Nyclyn (24 ÷ 0.80 x P15) P 450.00 A. P 600 Favorable C. P1,600 Favorable
Salex (19.20 ÷ 0.80 x P21) 504.00 B. P2,200 Unfavorable D. P1,600 Unfavorable
Protet (10 x P28) 280.00
Total P1,234.00 . Compo Co. uses a predetermined factory O/H application rate based on direct labor cost. For
42
2
the year ended December 31, Compo’s budgeted factory O/H was P600,000, based on a
. Answer: C budgeted volume of 50,000 direct labor hours, at a standard direct labor rate of P6 per hour.
Required inputs to be placed in process per unit of product: 2.25 ÷0.75 3.0 yards Actual factory O/H amounted to P620,000, with actual direct labor cost of P325,000. For the
Standard Material cost per unit of product: 3.0 x P150 P450 year, over-applied factory O/H was
3
A. P20,000 C. P30,000
. Answer: B B. P25,000 D. P50,000
Required inputs of raw materials (in pounds) (60 ÷ 0.80) 75.00
Standard price per pound (2.5 x 0.98) x 2.45 . The Terrain Company has a standard absorption and flexible budgeting system and uses a
43
Standard materials cost per unit 183.75 two-way analysis of overhead variances. Selected data for the June production activity are:
Budgeted fixed factory overhead costs P 64,000
4
. Answer: D Actual factory overhead 230,000
Net price per yard: Variable factory overhead rater per DLH P 5
Purchase price 40.00 Standard DLH 32,000
Freight 1.00 Actual DLH 32,000
Purchase discount 0.03 x 40 ( 1.20) The budget (controllable) variance for the month of June is:
Standard cost per yard 39.80 A. P1,000 favorable C. P1,000 unfavorable
Standard quantity per scarf 0.475/0.95 0.50 B. P6,000 favorable D. P6,000 unfavorable
Standard cost per scarf: 0.50 x 39.80 19.90
212
Standard Costs and Variance Analysis
. The standard factory overhead rate is P10 per direct labor hour (P8 for variable factory
44
. Abbey Company produces a single product. Abbey employs a standard cost system and uses
47
overhead and P2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor a flexible budget to predict overhead costs at various levels of activity. For the most recent
hours. The standard cost and the actual cost of factory overhead for the production of 5,000 year, Abbey used a standard overhead rate equal to P8.50 per direct labor hour. The rate was
units during May were as follows: computed using normal activity. Budgeted overhead costs are P100,000 for 10,000 direct
Standard: 25,000 hours at P10 P250,000 labor hours and P160,000 for 20,000 direct labor hours. During the past year, Abbey generate
Actual: Variable factory overhead 202,500 the following data:
Fixed factory overhead 60,000 Actual production: 1,400 units
What is the amount of the factory overhead volume variance? Fixed overhead volume variance: P5,000 U
A. 12,500 favorable C. 12,500 unfavorable Variable overhead efficiency variance: P3,000 F
B. 10,000 unfavorable D. 10,000 favorable Actual fixed overhead costs: P42,670
Actual variable overhead costs: P82,000
Three-way overhead variance The number of direct labor hours used as normal activity are:
45
. The following data are the actual results for Wow Company for the month of May: A. 16,000 C. 14,000
Actual output 4,500 units B. 15,000 D. 13,500
Actual variable overhead P360,000
Actual fixed overhead P108,000 . Using the information presented below, calculate the total overhead spending variance.
48
. The Libiran Company produces its only product, Menthol Chewing Gum. The standard
46
. The following data are the actual results for Bustos Company for the month of May:
49
overhead cost for one pack of the product follows: Actual output 4,500 units
Fixed overhead (1.50 hours at P18.00) P27.00 Actual variable overhead P360,000
Variable overhead (1.50 hours at P10.00) 15.00 Actual fixed overhead P108,000
Total application rate P42.00 Actual machine time 14,000 MH
Libiran uses expected volume of 20,000 units. During the year, Libiran used 31,500 direct Standard cost and budget information for Bustos Company follows:
labor hours for the production of 20,000 units. Actual overhead costs were P545,000 fixed Standard variable overhead rate P6.00 per MH
and P308,700 variable. Standard quantity of machine hours 3 hours per unit
The overhead efficiency variance is Budgeted fixed overhead P777,600 per year
A. P22,500 Favorable C. P15,000 Favorable Budgeted output 4,800 unit per month
B. P22,500 Unfavorable D. P15,000 Unfavorable The overhead efficiency variance is:
A. P3,000 Favorable C. P3,000 Unfavorable
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Standard Costs and Variance Analysis
Actual factory overhead P15,000 . Wala Company applies overhead on a direct labor hour basis. Each unit of product requires 5
54
Fixed overhead expenses, actual P 7,200 direct labor hours. Overhead is applied on a 30 percent variable and 70 percent fixed basis;
Fixed overhead expenses, budgeted P 7,000 the overhead application rate is P16 per hour. Standards are based on a normal monthly
Actual hours 3,500 capacity of 5,000 direct labor hours.
Standard hours 3,800 During September 2006, Wala produced 1,010 units of product and incurred 4,900 direct labor
Variable overhead rate per DLH P 2.50 hours. Actual overhead cost for the month was P80,000.
Assuming that Tyro uses a three-way analysis of overhead variances, what is the spending What is total annual budgeted fixed overhead cost?
variance? A. P 56,000 C. P672,000
A. P 750 F C. P 950 F B. P 56,560 D. P678,720
B. P 750 U D. P1,500 U
. Budgeted variable overhead for the level of production achieved is 40,000 machine-hours at a
55
. The Sacto Co.’s standard fixed overhead cost is P3 per direct labor hour based on budgeted
51
budgeted cost of P62,000. Actual variable overhead at the level of production achieved was
fixed costs of P300,000. The standard allows 2 direct labor hours per unit. During 2006, 38,000 hours at an actual cost of P62,400. What is the total variable overhead variance?
Sacto produced 55,000 units of product, incurred P315,000 of fixed overhead costs, and A. P400 favorable C. P3,100 unfavorable
recorded P106,000 actual hours of direct labor. What are the fixed overhead variances? B. P400 unfavorable D. P3,100 favorable
Spending variance Volume variance
A. P15,000 U P30,000 F . The Pinatubo Company makes and sells a single product and uses standard costing. During
56
B. P33,000 U P30,000 F January, the company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units
C. P15,000 U P18,000 F of product. The standard cost card for one unit of product includes the following:
D. P33,000 U P18,000 F Variable factory overhead: 3.0 DLHs @ P4.00 per DLH
Fixed factory overhead: 3.0 DLHs @ P3.50 per DLH
. Using the information in the preceding number, the amounts of controllable variances for
52
For January, the company incurred P22,000 of actual fixed overhead costs and recorded a
variable overhead are: P875 favorable volume variance.
Spending Efficiency The budgeted fixed overhead cost for January is:
A. P20,000 Fav P20,000 Unf A. P31,500 C. P30,625
B. P20,000 Unf P20,000 Fav B. P32,375 D. P33,250
C. P 5,000 Unf P20,000 Unf
D. P20,000 Fav P 5,000 Unf . The variable-overhead spending variance is P1,080, unfavorable. Variable overhead budgeted
57
at 40,000 machine hours is P50,000. Actual machine hours were 36,000. What was the actual
Four-way overhead variance variable-overhead rate per machine hour?
53
. Safin Corporation’s master budget calls for the production of 5,000 units of product monthly. A. P1.28 C. P1.39
The annual master budget includes indirect labor of P144,000 annually. Safin considers B. P1.25 D. P1.52
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 . Calvin Klein Company has a standard fixed cost of P6 per unit. At an actual production of
58
flexible budgeting would report a budget variance for indirect labor of: 8,000 units a favorable volume variance of P12,000 resulted. What were total budgeted fixed
214
Standard Costs and Variance Analysis
overhead spending variance, and P2,000 total under applied overhead. The fixed overhead to efficiency of the manufacturing operation for November is:
budget variance is: A. P 9,000 unfavorable C. P12,000 unfavorable
A. P41,000 favorable C. P45,000 favorable B. P21,000 unfavorable D. P11,000 unfavorable
B. P41,000 Unfavorable D. P45,000 Unfavorable
Question Nos. 65 and 66 are based on the following:
. Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were
61
Tiny Bubbles Company had the following activity relating to its fixed and variable overhead for the
budgeted. If the fixed overhead volume variance was P12,000 favorable and the fixed month of July.
overhead spending variance was P16,000 unfavorable, fixed manufacturing overhead applied Actual costs
must be: Fixed overhead P120,000
A. P516,000 C. P512,000 Variable overhead 80,000
B. P504,000 D. P496,000
Flexible budget
. CTV Company has a standard fixed cost of P6 per unit. At an actual production of 8,000 units
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(Standard input allowed for actual output achieved x the budgeted rate)
a favorable volume variance of P12,000 resulted. What were total budgeted fixed costs? Variable overhead P 90,000
A. P36,000 C. P48,000
B. P60,000 D. P75,000 Applied
(Standard input allowed for actual output achieved x the budgeted rate)
. Richard Company employs a standard absorption system for product costing. The standard
63
Fixed overhead P125,000
cost of its product is as follows: Variable overhead spending variance 1,200 F
Raw materials P14.50 Production volume variance 5,000 U
Direct labor (2 DLH x P8) 16.00
Manufacturing overhead (2 DLH x P11) 22.00 . If the budgeted rate for applying variable manufacturing overhead was P20 per direct labor
65
Total standard cost P52.50 hour, how efficient or inefficient was Tiny Bubbles in terms of using direct labor hours as an
The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor activity base?
hours. Richard planned to produce 25,000 units each month during the year. The budgeted A. 100 direct labor hours inefficient C. 100 direct labor hours efficient
annual manufacturing overhead is: B. 440 direct labor hours inefficient D. 440 direct labor hours efficient
Variable P 3,600,000
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Standard Costs and Variance Analysis
Spending Volume
The following information pertains to the month of March: A. P10,000 favorable P10,000 favorable
Units actually produced 38,000 B. P10,000 unfavorable P10,000 favorable
Actual direct labor hours worked 80,000 C. P 6,000 favorable P 3,000 unfavorable
Actual overhead incurred: D. P 4,000 unfavorable P22,000 favorable
Variable P250,000
Fixed 384,000 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
. For March, the unfavorable variable overhead spending variance was:
67 following set of information applies to the month of May, 2006:
A. P6,000 C. P12,000 Budgeted Actual
B. P10,000 D. P22,000 Units produced 40,000 38,000
Variable manufacturing OH P 4/DLH P16,400
. For March, the fixed overhead volume variance was:
68
Fixed manufacturing overhead P20/DLH P88,000
A. P96,000U C. P80,000U Direct labor hours 6 min/unit 4,200 hr
B. P96,000F D. P80,000F 71
. What is the fixed overhead spending variance?
A. P4,000 Favorable C. P8,000 Unfavorable
. Edney Company employs standard absorption system for product costing. The standard cost
69
B. P8,000 Favorable D. P4,000 Unfavorable
of its product is as follows:
Raw materials P14.50 . What is the volume variance?
72
November at a cost of P433,350. Actual manufacturing overhead for the month was P260,000 A. P1,600 Favorable C. P1,600 Unfavorable
fixed and P315,000 variable. The total manufacturing overhead applied during November was B. P 800 Favorable D. P800 Unfavorable
P572,000.
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Standard Costs and Variance Analysis
Questions 75 through 78 are based on Darf Company, which applies overhead on the basis of You have recently graduated from a university and have accepted a position with Villar Company,
direct labor hours. Two direct labor hours are required for each product unit. Planned production the manufacturer of a popular consumer product. During your first week on the job, the vice
for the period was set at 9,000 units. Manufacturing overhead is budgeted at P135,000 for the president has been favorably impressed with your work. She has been so impressed, in fact, that
period, of which 20% of this cost is fixed. The 17,200 hours worked during the period resulted in yesterday she called you into her office and asked you to attend the executive committee meeting
production of 8,500 units. Variable manufacturing overhead cost incurred was P108,500 and fixed this morning for the purpose of leading a discussion on the variances reported for last period.
manufacturing overhead cost was P28,000. Darf Company uses a four variance method for Anxious to favorably impress the executive committee, you took the variances and supporting data
analyzing manufacturing overhead. home last night to study.
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Standard Costs and Variance Analysis
the discussion or answer any questions. . Fireout Company manufactures fire hydrants in Bulacan. The following information pertains to
86
. How many actual direct labor hours were worked during the period?
82
Throughput time
A. 18,000 C. 19,400 87
. Choco Company manufactures fire hydrants in Bulacan. The following information pertains to
B. 16,600 D. 18,970 operations during the month of May:
Processing time (average per batch) 8.0 hours
. How much actual variable manufacturing overhead cost was incurred during the period?
83
Inspection time (average per batch) 1.5 hours
A. P55,300 C. P56,900 Waiting time (average per batch) 1.5 hours
B. P58,200 D. P59,500 Move time (average per batch) 1.5 hours
Units per batch 20 units
. What is the total fixed manufacturing overhead cost in the company’s flexible budget?
84
The throughput time is:
A. P112,500 C. P139,500 A. 12.5 hours C. 4.5 hours
B. P140,000 D. P125,500 B. 8.0 hours D. 9.5 hours
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Standard Costs and Variance Analysis
A. 22 days C. 14 days
B. 11 days D. 7 days
. Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were
89
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. P516,000 C. P512,000
B. P488,000 D. P496,000
219
Standard Costs and Variance Analysis
10
. Answer: A
6
. Answer: B
Weekly wages per worker 1,000
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
7
. 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
8
. Answer: C
Minutes required by sorting good berries 6 quarts @ 3 min. 18
Minutes required by mixing 12
Total number of minutes 30
Standard labor cost per batch (0.50 @ P50) P25
9
. 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 account P51,690
Debit to materials quantity variance 1,970
Credit to materials price variance ( 3,740)
Actual materials cost P49,920
Per unit cost: P49,920/96,000 P0.52
220
Standard Costs and Variance Analysis
221
Standard Costs and Variance Analysis
15
. 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
16
. 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
17
. Answer: C
MPV = 1,400(1.10 – 1.00)
= 140
18
. Answer: A
MUV = (AQ – SQ)SP
= (2,300 – 2,100) 6.25
= 1,250 Unfavorable
19
. Answer: C
Actual materials cost 26,400
AQ @ SP (22,000 x 1.25) 27,500
Favorable Price Variance ( 1,100)
20
. Answer: A
Standard materials cost per batch (200 x 1) + (840 x 0.20) + (7 x 2) + (3 x 6) P400
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Standard Costs and Variance Analysis
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224
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225
Standard Costs and Variance Analysis
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227
Standard Costs and Variance Analysis
47
. Answer: A
Fixed overhead rate per hour 8.50 – 6.00 2.50
Denominator hours (previous number) 40,000/2.5 16,000
48
. 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
49
. Answer: C
EV = (AH – SH) SVOHR (14,000 – 13,500) 6 3,000U
SH (4,500 x 3) 13,500
50
. Answer: A
Actual OH P15,000
Budgeted OH at actual hours (3,500 x P2.50) + P7,000 15,750
Favorable spending variance P( 750)
51
. 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
52
. Answer: A
Actual variable overhead 520,000
AH @ SVOHR (270,000 x 2) 540,000
Variable Oh spending variance, Favorable ( 20,000)
228
Standard Costs and Variance Analysis
53
. Answer: D
Actual P10,100
Budget (4,500 x 2.40) 10,800
Favorable Budget variance P( 700)
54
. Answer: C
Fixed overhead per hour: 16 x 0.7 11.20
Annual fixed OH budget 5,000 x 12 x 11.20 672,000
55
. Answer: B
Actual variable overhead 62,400
Variable OH applied 62,000
Unfavorable variable OH variance 400
56
. Answer: C
Applied fixed overhead (3,000 x 3 x 3.50) 31,500
Less: Favorable volume variance 875
Budgeted fixed overhead 30,625
57
. Answer: A
Standard rate: 50,000/40,000 1.25
Excess rate 1,080/3,600 0.03
Actual rate 1.28
58
. Answer: A
Applied fixed overhead 48,000
Less favorable volume variance 12,000
Budgeted fixed overhead 36,000
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Standard Costs and Variance Analysis
AH @ SVOHR 540,000
60
. Answer: A
Net OH variance, Unfavorable 2,000
Less: Unfavorable volume variance ( 18,000)
Unfavorable spending variance ( 25,000)
Favorable FOH budget variance 41,000
61
. Answer: C
Budgeted fixed OH 500,000
Add: Favorable volume variance 12,000
Applied fixed overhead 512,000
62
. Answer: A
Applied FOH (8,000 x 6) 48,000
Less: Favorable volume variance 12,000
Budgeted FOH 36,000
63
. 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
64
. Answer: B
Labor Efficiency: (53,500 – 52,000) 8 12,000
Variable OH Efficiency (53,500 – 52,000) 6 9,000
Total efficiency variance 21,000
230
Standard Costs and Variance Analysis
65
. 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
66
. Answer: D
Fixed overhead volume variance is a more meaningful variance in evaluating the use of the capacity.
67
. 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
68
. Answer: A
(38,000 units – 50,000 units) x P8 P96,000
69
. Answer: B
Spending [P315,000 – (53,500 x P6)] P(6,000)
Efficiency [(53,500 – 52,000) x P6] P 9,000
70
. Answer: B
Spending [P260,000 – (P3M ÷ 12)] P10,000U
Volume [(26,000 – 25,000) x P10] P10,000F
71
. Answer: C
Actual fixed overhead P88,000
Budget fixed overhead (4,000 hrs @ P20) 80,000
Unfavorable fixed OH Spending variance P 8,000
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Standard Costs and Variance Analysis
73
Budgeted (denominator) hours (40,000 units x 6 ÷ 60) 4,000
. Answer: A
Actual variable overhead P 16,400
Budget at actual hours (4,200 x P4) 16,800
Favorable variable OH spending variance P ( 400)
74
. 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
75
. Answer: A
Actual variable overhead 108,500
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 hours P6.00
76
. 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 P6 1,200 UNF
Standard hours allowed: 8,500 x 2 17,000
77
. 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 overhead 28,000
Budgeted fixed overhead (135,000 x 0.2) 27,000
Unfavorable fixed overhead budget variance 1,000
78
. 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.
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Standard Costs and Variance Analysis
235