CA 5107 – COST ACCOUNTING & CONTROL

QUIZZER – STANDARD COSTING

1. Which department should usually be held responsible for an unfavorable materials price
variance?
a. Production
b. Materials handling
c. Engineering
d. Purchasing

2. Under a standard cost system, the materials efficiency variances are the responsibility of
a. Production and industrial engineering
b. Purchasing and industrial engineering
c. Purchasing and sales
d. Sales and industrial engineering

3. Which set of terms describes the same type of variance?

a. Price variance, rate variance, use variance
b. Price variance, rate variance, efficiency variance
c. Use variance, efficiency variance, quantity variance
d. Use variance, efficiency variance, spending variance

4. The standard for each finished unit of product allows for 3 pounds of plastic at P0.72 per pound.
During December, 4,500 pounds of plastic were bought at P0.75 per pound, and used 4,100
pounds in the production of 1,300 finished units of product.

A) What is the materials quantity variance for December?

a. P144 F
b. P144 U
c. P432 F
d. P432 U

B) What is the materials price variance for December?

a. P123 F
b. P123 U
c. P135 F
d. P135 U

5. When performing input-output analysis in standard costing, standard hours allowed is a means of
measuring
a. Standard output at standard hours
b. Actual output at standard hours
c. Standard output at actual hours
d. Actual output at actual hours

6. A debit balance in the labor efficiency variance indicates that

a. Actual hours exceed standard hours
b. Standard hours exceed actual hours
c. Actual hours exceed normal hours
d. Normal hours exceed actual hours

1
7. If a project required 50 hours to complete at a cost of P10.00 per hour but should have taken only
45 hours at a cost of P12.00 per hour, what is the proper entry to record the costs?

a. Work in process 540

Labor usage variance 60
Labor money variance 100
Accrued payroll 500

b. Wages expense 440

Labor usage variance 60
Accrued payroll 500

c. Work in process 460

Labor money variance 100
Labor usage variance 60
Accrued payroll 500

d. Work in process 500

Accrued payroll 500

8. The direct labor costs for the month of July 2020 were as follows:

Actual DLH 20,000

Standard DLH 21,000
Total Payroll P 126,000
DL Rate Variance P 3,000 U

What was the direct labor efficiency variance?

a. P6,000 F
b. P6,150 F
c. P6,150 U
d. P6,300 U

9. Under the two-variance method for analyzing factory overhead, budget or controllable variance is
computed by subtracting from actual factory overhead costs incurred the
a. Budget allowed based on actual hours c. Budget allowed based on standard hours
b. Budget allowed based on normal hours d. Budget allowed based on budgeted
hours

10. The manufacturing overhead variances were determined as follows:

Variable FOH spending variance P 3,500 F
Fixed FOH spending variance P5,000 F
Variable FOH efficiency variance P 4,000 U
Fixed FOH volume variance P 6,500 U

The overhead controllable variance is

a. P500 U
b. P1,500 U
c. P4,500 F
d. P5,500 U

2
 11. Using the same data in No. 10, The total overhead variance is
a. P2,500 under-applied
b. P2,000 over-applied
c. P3,500 under-applied
d. P2,000 under-applied

12. How do you call the sum of materials variance, labor variance, and overhead variance?
a. Mix variance
b. Volume variance
c. Yield variance
d. Production cost variance

13. When evaluating the operating performance, management sometimes uses the difference between
expected and actual performance. This refers to:
a. Management by Deviation
b. Management by Control
c. Management by Objective
d. Management by Exception

14. Managers who properly apply the concept called “management by exception”, will:
a. investigate only unfavorable variances.
b. investigate only favorable variances.
c. always investigate unfavorable and favorable variances regardless of size.
d. investigate only variances of a certain size or scope.

15.The type of standard that is intended to represent challenging yet attainable results is:
A. theoretical standard
B. flexible budget standard
C. controllable cost standard
D. normal standard
E. expected actual standard

16.Standard costs are used for all of the following except:

A. income determination
B. controlling costs
C. measuring efficiencies
D. forming a basis for price setting
E. establishing budgets

17.Of the following variances, the one that is most useful in assessing the performance of the
Purchasing Department is the:
A. idle capacity variance
B. overhead price variance
C. materials purchase price variance
D. labor rate variance
E. materials price usage variance

18.The labor efficiency variance is computed as:

A. the difference between standard and actual rates, multiplied by standard hours
B. the difference between standard and actual hours, multiplied by standard rate
C. the difference between standard and actual rates, multiplied by actual hours

3
 D. the difference between standard and actual hours, multiplied by the difference between
standard and actual rates
E. a percentage of the labor time variance

19.Materials and labor cost standards are generally based on:

A. expected actual conditions, anticipated prices, and desired efficiency levels
B. theoretical conditions, present price levels, and desired efficiency levels
C. capacity conditions, anticipated prices, and desired efficiency levels
D. normal conditions, present price levels, and desired efficiency levels
E. theoretical conditions, anticipated prices, and theoretically attainable efficiency levels

20.The most effective standards are set following a careful study of products and operating conditions
by the:
A. Accounting Department, central management, and the Industrial Engineering Department
B. central management and the employees whose performance is being evaluated
C. Accounting Department and engineering staff
D. Industrial Engineering Department and the employees whose performance is being evaluated
E. central management and the Industrial Engineering Department

21.In analyzing factory overhead variances, the volume variance is the difference between the:
A. actual amount spent for overhead items during the period and the amount applied during the
period
B. variable efficiency variance and fixed efficiency variance
C. amount shown in the flexible budget and the amount shown in the master budget
D. master budget application rate and the flexible budget application rate, multiplied by actual
hours worked
E. budget allowance based on standard hours allowed for actual production for the period and the
amount of applied factory overhead during the period

(AICPA Adapted)

22.The variance resulting from obtaining an output different from the one expected on the basis of
input is the:
A. mix variance
B. output variance
C. usage variance
D. yield variance
E. efficiency variance

(AICPA Adapted)

23.A purpose of standard costing is to:

A. allocate cost with more accuracy
B. eliminate the need for subjective decisions by management
C. determine the "break-even" production level
D. control costs
E. all of the above

(AICPA Adapted)

4
24.Which one of the following is true concerning standard costs?
A. If properly used, standards can help motivate employees.
B. Unfavorable variances, material in amount, should be investigated, but large favorable
variances need not be investigated.
C. Standard costs are difficult to use with a process costing system.
D. Standard costs are estimates of costs attainable only under the most ideal conditions, but rarely
practicable.
E. All of the above

(AICPA Adapted)

25.When computing variances from standard costs, the difference between actual and standard price
multiplied by actual quantity yields a:
A. price variance
B. volume variance
C. mix variance
D. yield variance
E. combined price-quantity variance

(AICPA Adapted)

26.A company controls its production costs by comparing its actual monthly production costs with the
expected levels. Any significant deviations from expected levels are investigated and evaluated
as a basis for corrective actions. The quantitative technique that is most probably being used is:
A. time-series or trend regression analysis
B. correlation analysis
C. differential calculus
D. risk analysis
E. standard cost variance analysis

(AICPA Adapted)

27.What type of direct material variances for price and usage will arise if the actual number of pounds
of materials used was less than standard pounds allowed but actual cost exceeds standard cost?

Usage Price
A. unfavorable favorable
B. favorable favorable
C. favorable unfavorable
D. unfavorable unfavorable
E. none none

(AICPA Adapted)

28.If a company follows a practice of isolating variances at the earliest time , the appropriate time to
isolate and recognize a direct materials price variance would be when:
A. the purchase order is originated
B. materials are purchased
C. materials are issued
D. the materials requisition is prepared
E. materials are used in production

5
 (AICPA Adapted)

29.Which of the following would least likely cause an unfavorable materials quantity (usage)
variance?
A. labor that possesses skills equal to those required by the standards
B. scheduling of substantial overtime
C. a mix of direct materials that does not conform to plan
D. materials that do not meet specifications
E. machinery that has not been maintained properly

(CIA Adapted)

30.Information about Sargent Company's direct material costs is as follows:

Standard unit price P3.60

Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price varianceCunfavorable P240

What was the actual purchase price per unit, rounded to the nearest penny?
A. P3.06
B. P3.11
C. P3.45
D. P3.75
E. P3.60

(AICPA Adapted)

31.Using the following symbols, which formula represents the calculation of the labor rate variance?

AH = Actual hours
SH = Standard hours allowed for actual production
AR = Actual rate
SR = Standard rate

A. SR(AH - SH)
B. AR(AH - SH)
C. AH(AR - SR)
D. SH(AR - SR)
E. SH(SR - AR)

(AICPA Adapted)

32.When a change in the manufacturing process reduces the number of direct labor hours and
standards are unchanged, the resulting variance will be:
A. an unfavorable labor usage variance
B. an unfavorable labor rate variance
C. a favorable labor rate variance
D. a favorable labor usage variance
E. both (C) and (D) above

6
 (CIA Adapted)

33.The most probable reason a company would experience a favorable labor rate variance and an
unfavorable labor efficiency variance is that:
A. the mix of workers assigned to the particular job was heavily weighted toward the use
of higher 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 production 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
E. the actual price paid for materials that went into production was less than the standard
price that was expected to be paid

(AICPA Adapted)

34.Information on Orman Company's direct labor costs is as follows:

Standard direct labor rate................................................................................... P3.75

Actual direct labor rate....................................................................................... P3.50
Standard direct labor hours................................................................................ 10,000
Direct labor usage (efficiency) varianceCunfavorable....................................... P 4,200

What were the actual hours worked, rounded to the nearest hour?
A. 11,914
B. 10,714
C. 11,120
D. 11,200
E. none of the above

(AICPA Adapted)

35.Each unit of Product 8in1 requires two direct labor hours. Employee benefit costs are treated as
direct labor costs. Data on direct labor are as follows:

Number of direct employees.............................................................................. 25

Weekly productive hours per employee............................................................. 30
Estimated weekly wages per employee.............................................................. P240
Employee benefits (related to weekly wages).................................................... 25%

The standard direct labor cost per unit of Product 8in1 is:
A. P8.00
B. P10.00
C. P12.00
D. P20.00

(ICMA Adapted)

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

7
 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. Richard 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, 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
P250,000 fixed and P325,000 variable.

The manufacturing overhead controllable variance for November is:

A. P9,000 unfavorable
B. P13,000 unfavorable
C. P9,000 favorable
D. P4,000 favorable

(ICMA Adapted)

37.J. R. Richard 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. Richard 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
TOTAL..........................................................................................P6,600,000

During 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
P250,000 fixed and P325,000 variable.

The manufacturing overhead volume variance for November is:

A. P12,000 unfavorable
B. P10,000 unfavorable
C. P3,000 unfavorable

8
 D. P9,000 unfavorable

(ICMA Adapted)

38.The following information relates to Department 1 of Ruiz Company for the fourth quarter. The
total overhead variance is divided into three variances: spending, variable efficiency, and volume.

Actual total overhead (fixed plus variable)............................. P178,500

Budget formula....................................................................... P110,000 + P.50/hour
Total overhead application rate............................................... P1.50/hour
Actual hours worked............................................................... 121,000

What was the spending variance in this department during the quarter?
A. P8,000 favorable
B. P4,500 favorable
C. P8,000 unfavorable
D. P4,500 unfavorable

(AICPA Adapted)

39.The following information relates to Department 1 of Ruiz Company for the fourth quarter. The
total overhead variance is divided into three variances: spending, variable efficiency, and volume.

Actual total overhead (fixed plus variable)............................. P178,500

Budget formula....................................................................... P110,000 + P.50/hour
Total overhead application rate............................................... P1.50/hour
Actual hours worked............................................................... 121,000
Standard hours allowed for production................................... 130,000

What was the variable efficiency variance in this department during the quarter?
A. P4,500 favorable
B. P8,000 favorable
C. P4,500 unfavorable
D. P8,000 unfavorable

(AICPA Adapted)

40.Under the two-variance method for analyzing factory overhead, the controllable (budget) variance
is the difference between the:
A. actual fixed factory overhead and the budgeted fixed overhead
B. budget allowance based on standard hours allowed and the factory overhead applied to
production
C. budget allowance based on standard hours allowed and the budget allowance based on
actual hours worked
D. actual factory overhead and the factory overhead applied to production
E. actual factory overhead and the budget allowance based on standard hours allowed

(AICPA Adapted)

41.Materials usage variances are normally chargeable to the:

A. Production Department

9
 B. Purchasing Department
C. Finished Goods Department
D. Materials Storage Department
E. Factory Storeroom Department

(CIA Adapted)

42.Todco planned to produce 3,000 units of its single product, Teragram, during November. The
standard specifications for one unit of Teragram include six pounds of material at P.30 per pound.
Actual production in November was 3,100 units of Teragram. The accountant computed a
favorable materials purchase price variance of P380 and an unfavorable materials quantity
variance of P120. Based on these variances, one could conclude that:
A. more materials were purchased than were used
B. more materials were used than were purchased
C. the actual cost of materials was less than the standard cost
D. the actual usage of materials was less than the standard allowed
E. actual cost and usage of materials were both less than standard

(ICMA Adapted)

43.Information on Duke Co.'s direct material costs for May is as follows:

Actual quantity of direct materials purchased and used................................... 30,000 lbs.

Actual cost of direct materials.......................................................................... P84,000
Unfavorable direct materials usage variance.................................................... 3,000
Standard quantity of direct materials allowed for May production.................. 29,000 lbs.

For the month of May, Duke's direct materials price variance was:
A. P2,800 favorable
B. P2,800 unfavorable
C. P6,000 unfavorable
D. P6,000 favorable

(AICPA Adapted)

44.A company uses a standard cost system to account for its only product. The materials standard per
unit was 4 lbs. at P5.10 per lb. Operating data for April were as follows:

Material used................................................................................................... 7,800 lbs.

Cost of material used....................................................................................... P40,950
Number of finished units produced.................................................................. 2,000

The material usage variance for April was:

A. P1,020 favorable
B. P1,050 favorable
C. P1,170 unfavorable
D. P1,200 unfavorable

(CIA Adapted)

10
45.During the last three months, a manufacturer incurred an unfavorable labor efficiency variance. The
least likely cause of this variance is:
A. substantial materials were purchased at a discount at a previously unused supplier's
liquidation
B. for one week, only half of the workforce, those with the highest seniority, were called
in to work
C. a second production line with all new personnel was started
D. the cost-of-living adjustment for the three-month period was P.10 more per hour than
expected

(CIA Adapted)

46.The direct labor standards for producing a unit of a product are two hours at P10 per hour.
Budgeted production was 1,000 units. Actual production was 900 units, and direct labor cost was
P19,000 for 2,000 direct labor hours. The direct labor efficiency variance was:
A. P1,000 favorable
B. P1,000 unfavorable
C. P2,000 favorable
D. P2,000 unfavorable

(CIA Adapted)

47.Under the two-variance method for analyzing factory overhead, the factory overhead applied to
production is used in the computation of the:

Controllable Volume
(Budget) Variance Variance
A. yes no
B. yes yes
C. no yes
D. no no

(AICPA Adapted)

48.Under the three-variance method for analyzing factory overhead, which of the following is used in
computation of the spending variance?

Actual Factory Budget Allowance

Overhead Based on Actual Hours
A. no yes
B. no no
C. yes no
D. yes yes

(AICPA Adapted)

49.Compute the variable efficiency variance, using the following data:

Standard labor hours per good unit produced......................................................... 2

Good units produced.............................................................................................. 1,000
Actual labor hours used.......................................................................................... 2,100

11
 Standard variable overhead per standard labor hour............................................... P3
Actual variable overhead........................................................................................ P 6,500

A. P200 favorable
B. P200 unfavorable
C. P300 favorable
D. P300 unfavorable

(CIA Adapted)

50.The most appropriate time from a control standpoint to record any variance of actual materials
prices from standard is:
A. at the time of materials usage
B. as needed to evaluate the performance of the purchasing manager
C. at the time the materials are issued by the storeroom
D. at year end, when all variances will be known
E. at the time of purchase

(ICMA Adapted)

51.Standard costing will produce the same income before extraordinary items as does actual costing
when standard cost variances are assigned to:
A. work in process and finished goods inventories
B. an income or expense account
C. cost of goods sold and inventories
D. cost of goods sold
E. income summary

52.When items are transferred from stores to production, an accountant debits Work in Process and
credits Materials. During production, a materials quantity variance may occur. Materials
Quantity Variance is debited for an unfavorable variance and credited for a favorable variance.
The intent of variance entries is to provide:
A. accountability for materials lost during production
B. a means of safeguarding assets in the custody of the system
C. compliance with GAAP
D. information for use in controlling the cost of production
E. all of the above

53.At the end of an accounting period, a quantity variance that is significant in amount should be:
A. reported as a deferred charge or credit
B. allocated among work in process inventory, finished goods inventory, and cost of
goods sold
C. charged or credited to cost of goods manufactured
D. allocated among cost of goods manufactured, finished goods inventory, and cost of
goods sold

54.What is the normal year-end treatment of immaterial variances recognized in a cost accounting
system utilizing standards?
A. reclassified to deferred charges until all related production is sold
B. allocated among cost of goods manufactured and ending work in process inventory
C. closed to Cost of Goods Sold in the period in which they arose

12
 D. capitalized as a cost of ending finished goods inventory

55.An unacceptable treatment of factory overhead variances at an interim reporting date is to:
A. apportion the total only between work in process and finished goods inventories on
hand at the end of the interim reporting period
B. apportion the total only between that part of the current period's production remaining
in inventories at the end of the period and that part sold during the period
C. carry forward the total to be offset by opposite balances in later periods
D. charge or credit the total to Cost of Goods Sold during the period

13