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Cost Accounting Standard-Costing and-Variance-Analysis

Practice Exam with Answers
Accountancy (Central Philippine University)

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Standard Costs and Variance Analysis

STANDARD COSTS AND VARIANCE ANALYSIS D. Practical capacity

THEORIES: 6. A company employing very tight (high) standards in a standard cost

Standard cost system system should expect that
1. A primary purpose of using a standard cost system is A. No incentive bonus will be paid.
A. To make things easier for managers in the production facility. B. Most variances will be unfavorable.
B. To provide a distinct measure of cost control. C. Employees will be strongly motivated to attain the standard.
C. To minimize the cost per unit of production. D. Costs will be controlled better than if lower standards were used.
D. b and c are correct
7. To measure controllable production inefficiencies, which of the
2. Which one of the following statements is true concerning standard following is the best basis for a company to use in establishing the
costs? standard hours allowed for the output of one unit of product?
A. Standard costs are estimates of costs attainable only under the A. Average historical performance for the last several years
most ideal conditions, but rarely practicable. B. Engineering estimates based on ideal performance
B. Standard costs are difficult to use with a process-costing system. C. Engineering estimates based on attainable performance
C. If properly used, standards can help motivate employees. D. The hours per unit that would be required for the present
D. Unfavorable variances, material in amount, should be workforce to satisfy expected demand over the long run
investigated, but large favorable variances need not be
investigated. 8. Which of the following statements about the selection of standards
is true?
3. Which of the following is a purpose of standard costing? A. Ideal standards tend to extract higher performance levels since
A. Determine “breakeven” production level they give employees something to live up to.
B. Control costs B. Currently attainable standards may encourage operating
C. Eliminate the need for subjective decisions by management inefficiencies.
D. Allocate cost with more accuracy C. Currently attainable standards discourage employees from
achieving their full performance potential.
4. When evaluating the operating performance management D. Ideal standards demand maximum efficiency which may leave
sometimes uses the difference between expected and actual workers frustrated, thus causing a decline in performance.
performance. This refers to:
A. Management by Deviation C. Management by Objective Standard costs vs. budgeted costs
B. Management by Control D. Management by Exception 9. A difference between standard costs used for cost control and the
budgeted costs representing the same manufacturing effort can
Standard setting exist because
5. The best basis upon which cost standards should be set to measure A. standard costs must be determined after the budget is
controllable production inefficiencies is completed
A. Engineering standards based on ideal performance B. standard costs represent what costs should be while budgeted
B. Normal capacity costs represent expected actual costs
C. Engineering standards based on attainable performance C. budgeted costs are historical costs while standard costs are

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based on engineering studies 14.Standards that represent levels of operation that can be attained
D. budgeted costs include some “slack” or “padding” while with reasonable effort are called:
standard costs do not A. Theoretical standards C. Variable standards
B. Ideal standards D. Normal standards
Process costing
10.When standard costs are used in a process-costing system, how, if Variances
at all, are equivalent units involved or used in the cost report at Generic variances
standard? 15.When performing input/output variance analysis in standard
A. Equivalent units are not used. costing, “standard hours allowed” is a means of measuring
B. Equivalent units are computed using a “special” approach. A. Standard output at standard hours C. Actual output at
C. The actual equivalent units are multiplied by the standard cost standard hours
per unit. B. Standard output at actual hours D. Actual output at actual
D. The standard equivalent units are multiplied by the actual cost hours
per unit.
Two way variances
Normal costing Volume variance
11.The fixed overhead application rate is a function of a predetermined 16.A company uses a two-way analysis for overhead variances:
“normal” activity level. If standard hours allowed for good output budget (controllable) and volume. The volume variance is based on
equal this predetermined activity level for a given period, the the
volume variance will be A. Total overhead application rate
A. Zero B. Volume of total expenses at various activity levels
B. Favorable C. Variable overhead application rate
C. Unfavorable D. Fixed overhead application rate
D. Either favorable or unfavorable, depending on the budgeted
overhead. 17.Assuming that the standard fixed overhead rate is based on full
capacity, the cost of available but unused productive capacity is
Types of standards indicated by the:
12.The absolute minimum cost possible under the best conceivable A. Factory overhead cost volume variance
operating conditions is a description of which type of standard? B. Direct labor cost efficiency variance
A. Currently attainable (expected) C. Theoretical C. Direct labor cost rate variance
B. Normal D. Practical D. Factory overhead cost controllable variance

13.Standards, which are difficult to achieve due to reasons beyond the 18.In analyzing manufacturing overhead variances, the volume
individual performing the task, are the result of firm using which of variance is the difference between the:
the following methods to establish standards? A. Amount shown in the flexible budget and the amount shown in
A. Ideal Standards C. Practical Standards the debit side of the overhead control account
B. Lax Standards D. Employee Standards B. Predetermined overhead application rate and the flexible budget
application rate times actual hours worked

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C. Budget allowance based on standard hours allowed for actual 23.Which department is customarily held responsible for an
production for the period and the amount budgeted to be unfavorable materials usage variance?
applied during the period A. Quality control C. Purchasing
D. Actual amount spent for overhead items during the period and B. Engineering D. Production
the overhead amount applied to production during the period
Variance analysis
19.The variance least significant for purposes of controlling costs is 24.Which of the following should be least considered when deciding
the: whether to investigate a variance?
A. Material usage variance A. Whether the variance is favorable or unfavorable
B. Variable overhead efficiency variance B. Significance of the variance
C. Fixed overhead spending variance C. Cost of investigating the variance
D. Fixed overhead volume variance D. Trend of the variances over time

20.The variance most useful in evaluating plant utilization is the: Total materials variance
A. Variable overhead spending variance 25.If the total materials variance (actual cost of materials used
B. Fixed overhead spending variance. compared with the standard cost of the standard amount of
C. Variable overhead efficiency variance materials required) for a given operation is favorable, why must this
D. Fixed overhead volume variance variance be further evaluated as to price and usage?
A. There is no need to further evaluate the total materials variance
Four way variances if it is favorable
21.The choice of production volume as a denominator for calculating B. Generally accepted accounting principles require that all
its factory overhead rate variances be analyzed in three stages
A. Has no effect on the fixed factory overhead rate for applying C. All variances must appear in the annual report to equity owners
costs to production for proper disclosure
B. Has an effect on the variable factory overhead rate for applying D. To allow management to evaluate the efficiency of the
costs to production purchasing and production functions
C. Has no effect on the fixed factory overhead budget variance
D. Has no effect on the fixed factory overhead production volume Labor variances
variance 26.Which of the following unfavorable cost variances would be directly
affected by the relative position of a production process on a
22.The budgeted overhead costs for standard hours allowed and the learning curve?
overhead costs applied to product are the same amount A. Materials mix C. Labor rate
A. for both variable and fixed overhead costs. B. Materials price D. Labor efficiency
B. only when standard hours allowed is less than normal capacity.
C. for variable overhead costs. 27.Which of the following is the most probable reason with a company
D. for fixed overhead costs. would experience an unfavorable labor rate variance and a
favorable labor efficiency variance?
Responsibility for variances A. The mix of workers assigned to the particular job was heavily

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weighted toward the use of higherly paid, experienced based on 5,000 gallon capacity. Therefore, the cost of storing 4,000
individuals. gallons was P1,000 more (P.25 x 4,000) in total than if you had
B. The mix of workers assigned to the particular job was heavily stored 5,000 gallons of liquid in the tank. Which variance is being
weighted toward the use of new, relatively low paid, unskilled described?
workers. A. Variable-overhead efficiency variance
C. Because of the productive schedule, workers from other B. Fixed-overhead spending variance
production areas were assigned to assist in this particular C. Variable-overhead spending variance
process. D. Fixed-overhead volume variance
D. Defective materials caused more labor to be used in order to
produce a standard unit. 31.Favorable fixed overhead volume variance occurs if:
A. There is a favorable labor efficiency variance
Two-way overhead variance B. There is a favorable labor rate variance
28.The budget for a given cost during a given period was P1,600,000. C. Production is less than planned
The actual cost for the period was P1,440,000. Considering these D. Production is greater than planned
facts, it can be said that the plant manager has done a better than
expected job in controlling the cost if: 32.The unfavorable volume variance may be due to all but which of the
A. The cost is variable and actual production was 90% of budgeted following factors?
production A. Failure to maintain an even flow of work
B. The cost is variable and actual production equaled budgeted B. Machine breakdowns
production C. Unexpected increases in the cost of utilities
C. The cost is variable and actual production was 80% of budgeted D. Failure to obtain enough sales orders
production
D. The cost is discretionary fixed cost and actual production 33. How will a favorable volume variance affect net income under each of the following
equaled budgeted production methods?
Absorpt Variabl
Budget variance ion e
29.The budget variance for fixed factory overhead for the normal- A. Decrea No
volume, practical-capacity, and expected-activity levels would be se eff
the: ect
A. Same except for normal volume C. Same except for B. Decrea Increa
expected activity se se
B. Same except for practical capacity D. Same for all three C. Increas No
activity levels e eff
ect
Volume variance D. Increas Decre
30.You have leased a 5,000-gallon storage tank for P5,000 per month. e ase
You stored 4,000 gallons of liquid in the tank during the month. The
cost of storage was P1.25 per gallon, rather than P1.00 per gallon 34.Favorable volume variances may be harmful when:

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A. Machine repairs cause work stoppages of this new chemical solution are as follows:
B. Supervisors fail to maintain an even flow of work Nyclyn P15.00 per kilogram
C. Production in excess of normal capacity cannot be sold Salex P21.00 per liter
D. There are insufficient sales orders to keep the factory operating Protet P28.00 per kilogram
at normal capacity The total standard materials cost of 20 liters of the product is:
A. P1,043.20 C. P 834.56
Three-way Overhead variance B. P1,304.00 D. P1,234.00
35. During 2006, a department’s three-variance overhead standard costing system reported
unfavorable spending and volume variances. The activity level selected for allocating 2
. El Andre Co. uses a standard costing system in connection with the
overhead to the product was based on 80% of practical capacity. It 100% of practical capacity manufacture of a line of T-shirts. Each unit of finished product
had been selected instead, how would the reported unfavorable spending and volume contains 2.25 yards of direct material. However, a 25 percent direct
variances be affected?
material spoilage calculated on input quantities occurs during the
Spending Volume
manufacturing process. The cost of the direct materials is P150 per
Variance Variance
yard. The standard direct material cost per unit of finished product
A. Increased Unchanged
is
B. Increased Increased
A. P 253 C. P 450
C. Unchanged Increased
B. P 422 D. P 405
D. Unchanged Unchanged
3
. Each finished unit of Product EM contains 60 pounds of raw
material. The manufacturing process must provide for a 20% waste
PROBLEMS:
allowance. The raw material can be purchased for P2.50 a pound
Standard setting
under terms of 2/10, n/30. The company takes all cash discounts.
Raw Materials
1 The standard direct material cost for each unit of EM is:
. Shampoo Company is a chemical manufacturer that supplies
A. P180.00 C. P187.50
industrial users. The company plans to introduce a new chemical
B. P183.75 D. P176.40
solution and needs to develop a standard product cost for this new
solution. 4
. The Vandana Company has a signature scarf for ladies that is very
popular. Certain production and marketing data are indicated
The new chemical solution is made by combining a chemical
below:
compound (Nyclyn) and a solution (Salex), boiling the mixture;
Cost per yard of cloth P40.00
adding a second compound (Protet), and bottling the resulting
Allowance for rejected scarf 5% of production
solution in 20-liter containers. The initial mix, which is 20 liters in
Yards of cloth needed per scarf 0.475 yard
volume, consists of 24 kilograms of Nyclyn and 19.2 liters of Salex.
Airfreight from supplier P1.00/yard
A 20% reduction in volume occurs during the boiling process. The
Motor freight to customers P0.90 /scarf
solution is then cooled slightly before 10 kilograms of Protet are
Purchase discounts from supplier 3%
added; the addition of Protet does not affect the total liquid volume.
Sales discount to customers 2%
The allowance for rejected scarf is not part of the 0.475 yard of
The purchase prices of the raw materials used in the manufacture
cloth per scarf. Rejects have no market value. Materials are used

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at the start of production. Questions Nos. 7 and 8 are based on the following:
Calculate the standard cost of cloth per scarf that Vandana Supercold Company is a small producer of fruit-flavored frozen
Company should use in its cost sheets. desserts. For many years, Supercold’s products have had strong
A. P19.85 C. P19.40 regional sales on the basis of brand recognition. However, other
B. P20.00 D. P19.90 companies have begun marketing similar products in the area, and
price competition has become increasingly important. Haydee Mejia,
Direct labor the company’s controller, is planning to implement a standard costing
5
. Double M company is a chemical manufacturer that supplies system for Supercold and has gathered considerable information on
various products to industrial users. The company plans to production and material requirements for Supercold’s products.
introduce a new chemical solution called Bysap, for which it needs Haydee believes that the use of standard costing will allow Supercold
to develop a standard product cost. The following labor information to improve cost control and make better pricing decisions.
is available on the production of Bysap.
 The product, which is bottled in 10-liter containers, is Supercold’s most popular products is strawberry sherbet. The sherbet
primarily a mixture of Byclyn, Salex, and Protet. is produced in 10-gallon batches, and each batch requires six quarts of
 The finished product is highly unstable, and one 10-liter good strawberries. The fresh strawberries are sorted by hand before
batch out of six is rejected at final inspection. Rejected batches entering the production process. Because of imperfections in the
have no commercial value and are thrown out. strawberries and normal spoilage, one quart of berries is discarded for
 It takes a worker 35 minutes to process one 10-liter batch of every four quarts of acceptable berries. Three minutes is the standard
Bysap. Employees work on eight-hour a day, including one hour direct labor time for sorting that is required to obtain one quart of
per day for rest breaks and cleanup. acceptable berries. The acceptable berries are then blended with the
What is the standard labor time to produce one 10-liter batch of other ingredients; blending requires 12 minutes of direct labor time per
Bysap? batch. After blending, the sherbet is package in quart containers.
A. 35 minutes C. 48 minutes Haydee has gathered the following information from Rizza Alano,
B. 40 minutes D. 45 minutes Supercold’s cost accountant.
6
. The following direct labor information pertains to the manufacture Supercold purchases strawberries at a cost of P8.00 per quart. All
of Part J35: other ingredients cost a total of P4.50 per gallon.
Number of hours required to make a part 2.5 DLH Direct labor is paid at the rate of P50 per hour.
Number of Direct workers 75 The total cost of material and labor required to package the sherbet is
Number of total productive hours per week 3000 P3.80 per quart.
Weekly wages per worker P1,000
Laborers’ fringe benefits treated as direct labor costs 25% of Rizza Alano has a friend who owns a berry farm that has been losing
wages money in recent years. Because of good crops, there has been an
What is the standard direct labor cost per unit of Part J35? oversupply of strawberries, and prices have dropped to P5.00 per
A. P62.500 C. P41.670 quart. Rizza has arranged for Supercold to purchase strawberries form
B. P78.125 D. P84.125 her friend and hopes that P8.00 per quart will help her friend’s farm
become profitable again.
Materials & Labor

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7
. The standard materials cost per 10-gallon batch of strawberry costing P1.50 each. Sheridan purchased 14,910 units of
sherbet is: component BB for P22,145. Sheridan generated a P220 favorable
A. P 85.00 C. P101.00 price variance and a P3,735 favorable quantity variance. If there
B. P 60.00 D. P105.00 were no changes in the component inventory, how many units of
finished product were produced?
8
. The standard direct labor cost per 10-gallon batch of sherbet is: A. 994 units. C. 1,000 units
A. P50.00 C. P25.00 B. 1,090 units. D. 1,160 units
B. P28.75 D. P15.00
13
. The standard usage for raw materials is 5 pounds at P40.00 per
Materials variance pound. Cave Company spent P131,200 in purchasing 3,200
9
. Under a standard cost system, the materials quantity variance was pounds. Cave used 3,150 pounds to produce 600 units of finished
recorded at P1,970 unfavorable, the materials price variance was product. The material quantity variance is:
recorded at P3,740 favorable, and the Goods in Process was debited A. P6,000 unfavorable C. P3,200 unfavorable
for P51,690. Ninety-six thousand units were completed. What was B. P5,200 unfavorable D. P2,000 unfavorable
the per unit price of the actual materials used?
14
A. P0.52 each C. P0.54 eac . The Bohol Company uses standard costing. The following data are
B. P0.53 each D. P0.51 each available for October:
Actual quantity of direct materials used 23,500 pounds
10
. Blake Company has a standard price of P5.50 per pound for Standard price of direct materials P2 per pound
materials. July’s results showed an unfavorable material price Material quantity variance P1,000 U
variance of P44 and a favorable quantity variance of P209. If 1,066 The standard quantity of materials allowed for October production
pounds were used in production, what was the standard quantity is:
allowed for materials? A. 23,000 lbs C. 24,000 lbs
A. 1,104 C. 1,066 B. 24,500 lbs D. 25,000 lbs
B. 1,074 D. 1,100
15
. Information on Dulce’s direct material costs for May is as follows:
11
. Elite Company uses a standard costing system in the manufacture Actual quantity of direct materials purchased and used30,000
of its single product. The 35,000 units of raw material in inventory lbs.
were purchased for P105,000, and two units of raw material are Actual cost of direct materials P84,000
required to produce one unit of final product. In November, the Unfavorable direct materials usage variance P 3,000
company produced 12,000 units of product. The standard allowed Standard quantity of direct materials allowed for May production
for material was P60,000, and there was an unfavorable quantity 29,000 lbs
variance of P2,500. The materials price variance for the units used For the month of May, Dulce’s direct materials price variance was:
in November was A. P2,800 favorable C. P2,800 unfavorable
A. P 2,500 U C. P12,500 U B. P6,000 unfavorable D. P6,000 favorable
B. P11,000 U D. P 3,500 F
16
. Information on Katrina Company’s direct material costs is as
12
. Sheridan Company has a standard of 15 parts of component BB follows:

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Standard unit price P 3.60 A. P1,000 favorable C. P1,100 favorable

Actual quantity purchased 1,600 B. P1,400 unfavorable D. P2,500 unfavorable
Standard quantity allowed for actual production 1,450
Materials purchase price variance – favorable P 240 20
. Samson Candle Co. manufactures candles in various shapes, sizes, colors, and
What was the actual purchase price per unit, rounded to the scents. Depending on the orders received, not all candles require the same
nearest centavos? amount of color, dye, or scent materials. Yields also vary, depending upon the
A. P3.06 C. P3.11 usage of beeswax or synthetic wax. Standard ingredients for 1,000 pounds of
B. P3.45 D. P3.75 candles are:
17 Input: Standard Mix Standard Cost per
. Palmas Company, which has a standard cost system, had 500 units
Pound
of raw material X in its inventory at June 1, purchased in May for
Beeswax 200 lbs. 1.00
P1.20 per unit and carried at a standard cost of P1.00. The following
Synthetic wax 840 lbs. 0.20
information pertains to raw material X for the month of June:
Colors 7 lbs. 2.00
Actual number of units purchased 1,400
Scents 3 lbs. 6.00
Actual number of units used 1,500
Totals 1,050 lbs. 9.20
Standard number of units allowed for actual production 1,300
Standard cost per unit P1.00 Standard 1,000 lbs.
Actual cost per unit P1.10 output
The unfavorable materials purchase price variance for raw material Price variances are charged off at the time of purchase. During
X for June was: January, the company was busy manufacturing red candles for
A. P 0 C. P140 Valentine’s Day. Actual production then was:
B. P130 D. P150 Input: In Pounds
Beeswax 4,100
18
. During March, Lumban Company’s direct material costs for the Synthetic wax 13,800
manufacture of product T were as follows: Colors 2,200
Actual unit purchase price P6.50 Scents 60
Standard quantity allowed for actual production 2,100 Total 20,160
Quantity purchased and used for actual production 2,300 Actual output 18,500
Standard unit price P6.25 The material yield variance is:
Lumban’s material usage variance for March was: A. P 280 unfavorable C. P 280 favorable
A. P1,250 unfavorable C. P1,250 favorable B. P3,989 unfavorable D. P3,989 favorable
B. P1,300 unfavorable D. P1,300 favorable
Labor variance
21
19
. Razonable Company installs shingle roofs on houses. The standard . The flexible budget for the month of May 2007 was for 9,000 units
material cost for a Type R house is P1,250, based on 1,000 units at with direct material at P15 per unit. Direct labor was budgeted at
a cost of P1.25 each. During April, Razonable installed roofs on 20 45 minutes per unit for a total of P81,000. Actual output for the
Type R houses, using 22,000 units of material cost of P26,400. month was 8,500 units with P127,500 in direct material and
Razonable’s material price variance for April is: P77,775 in direct labor expense. Direct labor hours of 6,375 were

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actually worked during the month. Variance analysis of the hours of labor. What was the standard direct labor wage rate?
performance for the month of May would show a(n): A. P8.94 C. P8.00
A. Favorable material quantity variance of P7,500. B. P7.94 D. P7.80
B. Unfavorable direct labor efficiency variance of P1,275.
26
C. Unfavorable material quantity variance of P7,500. . Powerless Company’s operations for April disclosed the following
D. Unfavorable direct labor rate variance of P1,275. data relating to direct labor:
Actual cost P10,000
22
. The standard hourly rate was P4.10. Standard hours for the level of Rate variance 1,000
production are 4,000. The actual rate was P4.27. The labor rate favorable
variance was P654.50, unfavorable. What were the actual labor Efficiency variance 1,500
hours? unfavorable
A. 3,700 C. 3,850 Standard cost P 9,500
B. 4,150 D. 4,000 Actual direct labor hours for April amounted to 2,000. Powerless’
standard direct labor rate per hour in April was:
23
. Clean Harry Corp. uses two different types of labor to manufacture A. P5.50 C. P5.00
its product. The types of labor, Mixing and Finishing, have the B. P4.75 D. P4.50
following standards:
27
Labor Type Standard Mix Std Hourly Standard . Lion Company’s direct labor costs for the month of January were as
Rate Cost follows:
Mixing 500 hours P10 P5,000 Actual direct labor hours 20,000
Finishing 250 hours P5 P1,250 Standard direct labor hours 21,000
Yield: 4,000 units Direct labor rate variance – Unfav. P 3,000
During January, the following actual production information was provided: Total payroll P126,000
What was Lion’s direct labor efficiency variance?
Labor Type Actual Mix
A. P6,000 favorable C. P6,150 favorable
Mixing 4,500 hours
B. P6,300 favorable D. P6,450 favorable
Finishing 3,000 hours
Yield: 36,000 units 28
. Using the information given below, determine the labor efficiency
What is the labor mix variance? variance:
A. P2,500 F C. P2,500 U Labor price per hour P 20
B. P5,000 F D. P5,000 F Standard labor price per gallon of output at 20 gal./hr P 1
24
Standard labor cost of 8,440 gallons of actual output P8,440
. How much labor yield variances should be reported? Actual total inputs(410 hours at P21/hr) P8,610
A. P6,250 U C. P5,250 F A. P 410 unfavorable C. P 240 favorable
B. P6,250 F D. P5,250 U B. P 170 unfavorable D. P 410 favorable
25
. Hingis had a P750 unfavorable direct labor rate variance and an 29
. Simbad Company’s operations for the month just ended originally
P800 favorable efficiency variance. Hingis paid P7,150 for 800 set up a 60,000 direct labor hour level, with budgeted direct labor

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of P960,000 and budgeted variable overhead of P240,000. The overhead for the month was P30,750.
actual results revealed that direct labor incurred amounted to What were the standard hours allowed during the month of April?
P1,148,000 and that the unfavorable variable overhead variance A. 50,250 C. 58,625
was P40,000. Labor trouble caused an unfavorable labor efficiency B. 48,550 D. 37,520
variance of P120,000, and new employees hired at higher rates
33
resulted in an actual average wage rate of P16.40 per hour. The . Information on Barber Company’s direct labor costs for the month
total number of standard direct labor hours allowed for the actual of January is as follows:
units produced is Actual direct labor hours 34,500
A. P52,500 C. P62,500 Standard direct labor hours 35,000
B. P77,500 D. P70,000 Total direct labor payroll P241,500
Direct labor efficiency variance – favorable P 3,200
Questions 30 and 31 are based on the following information. What is Barber’s direct labor rate variance?
Information on Goodeve Company’s direct labor costs are presented A. P17,250 U C. P21,000 U
below: B. P20,700 U D. P21,000 F
Standard direct labor hours 30,000
34
Actual direct labor hours 29,000 . STA Company uses a standard cost system. The following
Direct labor efficiency variance Favorable P 4,000 information pertains to direct labor costs for the month of June:
Direct labor rate variance Favorable P 5,800 Standard direct labor rate per hour P 10.00
Total payroll P110,200 Actual direct labor rate per hour P 9.00
Labor rate variance (favorable) P12,000
30
. What was Goodeve’s standard direct labor rate? Actual output (units) 2,000
A. P3.54 C. P3.80 Standard hours allowed for actual production 10,000 hours
B. P4.00 D. P5.80 How many actual labor hours were worked during March for STA
Company?
31
. What was Goodeve’s actual direct labor rate? A. 10,000 C. 8,000
A. P3.60 C. P3.80 B. 12,000 D. 10,500
B. P4.00 D. P5.80
35
. Information of Hanes’ direct labor costs for the month of May is as
32
. The Islander Corporation makes a variety of leather goods. It uses follows:
standards costs and a flexible budget to aid planning and control. Actual direct labor rate P7.50
Budgeted variable overhead at a 45,000-direct labor hour level is Standard direct labor hours allowed 11,000
P27,000. Actual direct labor hours 10,000
During April material purchases were P241,900. Actual direct-labor Direct labor rate variance – favorable P5,500
costs incurred were P140,700. The direct-labor usage variance was What was the standard direct labor rate in effect for the month of
P5,100 unfavorable. The actual average wage rate was P0.20 lower May?
than the average standard wage rate. A. P6.95 C. P8.00
The company uses a variable overhead rate of 20% of standard B. P7.00 D. P8.05
direct-labor cost for flexible budgeting purposes. Actual variable

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Two-way overhead variance A. P 3,000 Favorable C. P 5,000 Favorable

36
. The overhead variances for Big Company were: B. P 9,000 Favorable D. P10,500 Unfavorable
Variable overhead spending variance: P3600 favorable.
39
Variable overhead efficiency variance: P6,000 unfavorable. . Heart Company uses a flexible budget system and prepared the following information
Fixed overhead spending variance: P10,000 favorable. for the year:
Fixed overhead volume variance: P24,000 favorable. Percent of Capacity 80 90 Percent
What was the overhead controllable variance? Percent
A. P31,600 favorable C. P24,000 favorable Direct labor hours 24,000 27,000
B. P13,600 favorable D. P 7,600 favorable Variable factory overhead P 54,000 P 60,750
Fixed factory overhead P 81,000 P 81,000
37
. Kent Company sets the following standards for 2007: Total factory overhead rate P5.625 P5.25
Direct labor cost (2 DLH @ P4.50) P 9.00 per DLH
Manufacturing overhead (2 DLH @ P7.50) 15.00 Heart operated at 80 percent of capacity during the year, but
Kent Company plans to produce its only product equally each applied factory overhead based on the 90 percent capacity level.
month. The annual budget for overhead costs are: Assuming that actual factory overhead was equal to the budgeted
Fixed overhead P150,000 amount of overhead, how much was the overhead volume variance
Variable overhead 300,000 for the year?
Normal activity in direct labor hours 60,000 A. P 9,000 unfavorable C. P 9,000 favorable
In March, Kent Company produced 2,450 units with actual direct B. P15,750 unfavorable D. P15,750 favorable
labor hours used of 5,050. Actual overhead costs for the month
amounted to P37,245 (Fixed overhead is as budgeted.) 40
. The Fire Company has a standard absorption and flexible budgeting
The amount of overhead volume variance for Kent Company is system and uses a two-way analysis of overhead variances.
A. P250 unfavorable C. P500 unfavorable Selected data for the June production activity are:
B. P750 Unfavorable D. P375 Unfavorable Budgeted fixed factory overhead costs P 64,000
38
Actual factory overhead 230,000
. Calma Company uses a standard cost system. The following Variable factory overhead rater per DLH P 5
budget, at normal capacity, and the actual results are summarized Standard DLH 32,000
for the month of December: Actual DLH 32,000
Direct labor hours 24,000 The budget (controllable) variance for June is
Variable factory OH P 48,000 A. P1,000 favorable C. P1,000 unfavorable
Fixed factory OH P108,000 B. P6,000 favorable D. P6,000 unfavorable
Total factory OH per DLH P 6.50
Actual data for December were as follows: 41
. Sorsogon Company had actual overhead of P14,000 for the year.
Direct labor hours worked 22,000 The company applied overhead of P13,400. If the overhead
Total factory OH P147,000 budgeted for the standard hours allowed is P15,600, the overhead
Standard DLHs allowed for capacity attained 21,000 controllable variance is
Using the two-way analysis of overhead variance, what is the A. P 600 Favorable C. P1,600 Favorable
controllable variance for December? B. P2,200 Unfavorable D. P1,600 Unfavorable

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Actual output 4,500 units

42
. Compo Co. uses a predetermined factory O/H application rate based Actual variable overhead P360,000
on direct labor cost. For the year ended December 31, Compo’s Actual fixed overhead P108,000
budgeted factory O/H was P600,000, based on a budgeted volume Actual machine time 14,000 MH
of 50,000 direct labor hours, at a standard direct labor rate of P6 Standard cost and budget information for Wow Company follows:
per hour. Actual factory O/H amounted to P620,000, with actual Standard variable overhead rate P6.00 per MH
direct labor cost of P325,000. For the year, over-applied factory Standard quantity of machine hours 3 hours per unit
O/H was Budgeted fixed overhead P777,600 per year
A. P20,000 C. P30,000 Budgeted output 4,800 units per month
B. P25,000 D. P50,000 The overhead efficiency variance is
A. P3,000 Favorable C. P3,000 Unfavorable
43
. The Terrain Company has a standard absorption and flexible B. P5,400 Favorable D. P5,400 Unfavorable
budgeting system and uses a two-way analysis of overhead
46
variances. Selected data for the June production activity are: . The Libiran Company produces its only product, Menthol Chewing
Budgeted fixed factory overhead costs P 64,000 Gum. The standard overhead cost for one pack of the product
Actual factory overhead 230,000 follows:
Variable factory overhead rater per DLH P 5 Fixed overhead (1.50 hours at P18.00) P27.00
Standard DLH 32,000 Variable overhead (1.50 hours at P10.00) 15.00
Actual DLH 32,000 Total application rate P42.00
The budget (controllable) variance for the month of June is: Libiran uses expected volume of 20,000 units. During the year,
A. P1,000 favorable C. P1,000 unfavorable Libiran used 31,500 direct labor hours for the production of 20,000
B. P6,000 favorable D. P6,000 unfavorable units. Actual overhead costs were P545,000 fixed and P308,700
variable.
44
. The standard factory overhead rate is P10 per direct labor hour (P8 The overhead efficiency variance is
for variable factory overhead and P2 for fixed factory overhead) A. P22,500 Favorable C. P15,000 Favorable
based on 100% capacity of 30,000 direct labor hours. The standard B. P22,500 Unfavorable D. P15,000 Unfavorable
cost and the actual cost of factory overhead for the production of
47
5,000 units during May were as follows: . Abbey Company produces a single product. Abbey employs a
Standard:25,000 hours at P10 P250,000 standard cost system and uses a flexible budget to predict
Actual: Variable factory overhead 202,500 overhead costs at various levels of activity. For the most recent
Fixed factory overhead 60,000 year, Abbey used a standard overhead rate equal to P8.50 per
What is the amount of the factory overhead volume variance? direct labor hour. The rate was computed using normal activity.
A. 12,500 favorable C. 12,500 unfavorable Budgeted overhead costs are P100,000 for 10,000 direct labor
B. 10,000 unfavorable D. 10,000 favorable hours and P160,000 for 20,000 direct labor hours. During the past
year, Abbey generate the following data:
Three-way overhead variance Actual production: 1,400 units
45
. The following data are the actual results for Wow Company for the Fixed overhead volume variance: P5,000 U
month of May: Variable overhead efficiency variance: P3,000 F

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Actual fixed overhead costs: P42,670 Standard hours 3,800

Actual variable overhead costs: P82,000 Variable overhead rate per DLH P 2.50
The number of direct labor hours used as normal activity are: Assuming that Tyro uses a three-way analysis of overhead
A. 16,000 C. 14,000 variances, what is the spending variance?
B. 15,000 D. 13,500 A. P 750 F C. P 950 F
B. P 750 U D. P1,500 U
48
. Using the information presented below, calculate the total overhead
51
spending variance. . The Sacto Co.’s standard fixed overhead cost is P3 per direct labor
Budgeted fixed overhead P10,000 hour based on budgeted fixed costs of P300,000. The standard
Standard variable overhead (2 DLH at P2 per DLH)P4 per unit allows 2 direct labor hours per unit. During 2006, Sacto produced
Actual fixed overhead P10,300 55,000 units of product, incurred P315,000 of fixed overhead costs,
Actual variable overhead P19,500 and recorded P106,000 actual hours of direct labor. What are the
Budgeted volume (5,000 units x 2 DLH) 10,000 DLH fixed overhead variances?
Actual direct labor hours (DLH) 9,500 Spending variance Volume variance
Units produced 4,500 A. P15,000 U P30,000 F
A. P 500 U C. P1,000 U B. P33,000 U P30,000 F
B. P 800 U D. P1,300 U C. P15,000 U P18,000 F
D. P33,000 U P18,000 F
49
. The following data are the actual results for Bustos Company for the
52
month of May: . Using the information in the preceding number, the amounts of
Actual output 4,500 units controllable variances for variable overhead are:
Actual variable overhead P360,000 Spending Efficiency
Actual fixed overhead P108,000 A. P20,000 Fav P20,000 Unf
Actual machine time 14,000 MH B. P20,000 Unf P20,000 Fav
Standard cost and budget information for Bustos Company follows: C. P 5,000 Unf P20,000 Unf
Standard variable overhead rate P6.00 per MH D. P20,000 Fav P 5,000 Unf
Standard quantity of machine hours 3 hours per unit
Budgeted fixed overhead P777,600 per year Four-way overhead variance
53
Budgeted output 4,800 unit per month . Safin Corporation’s master budget calls for the production of 5,000
The overhead efficiency variance is: units of product monthly. The annual master budget includes
A. P3,000 Favorable C. P3,000 Unfavorable indirect labor of P144,000 annually. Safin considers indirect labor to
B. P5,400 Favorable D. P5,400 Unfavorable be a variable cost. During the month of April, 4,500 units of
product were produced, and indirect labor costs of P10,100 were
50
. The following information is available from the Tyro Company: incurred. A performance report utilizing flexible budgeting would
Actual factory overhead P15,000 report a budget variance for indirect labor of:
Fixed overhead expenses, actual P 7,200 A. P1,900 Unfavorable. C. P1,900 Favorable.
Fixed overhead expenses, budgeted P 7,000 B. P 700 Unfavorable. D. P 700 Favorable.
Actual hours 3,500

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54
. Wala Company applies overhead on a direct labor hour basis. Each
58
unit of product requires 5 direct labor hours. Overhead is applied . Calvin Klein Company has a standard fixed cost of P6 per unit. At
on a 30 percent variable and 70 percent fixed basis; the overhead an actual production of 8,000 units a favorable volume variance of
application rate is P16 per hour. Standards are based on a normal P12,000 resulted. What were total budgeted fixed costs?
monthly capacity of 5,000 direct labor hours. A. P36,000. C. P48,000.
During September 2006, Wala produced 1,010 units of product and B. P60,000. D. P75,000.
incurred 4,900 direct labor hours. Actual overhead cost for the
59
month was P80,000. . Puma Company had an 25,000 unfavorable volume variance, a
What is total annual budgeted fixed overhead cost? P18,000 unfavorable variable overhead spending variance, and
A. P 56,000 C. P672,000 P2,000 total under applied overhead. The fixed overhead budget
B. P 56,560 D. P678,720 variance is
A. P41,000 favorable C. P45,000 favorable
55
. Budgeted variable overhead for the level of production achieved is B. P41,000 Unfavorable D. P45,000 Unfavorable
40,000 machine-hours at a budgeted cost of P62,000. Actual
60
variable overhead at the level of production achieved was 38,000 . Arlene had an P18,000 unfavorable volume variance, a P25,000
hours at an actual cost of P62,400. What is the total variable unfavorable variable overhead spending variance, and P2,000 total
overhead variance? under applied overhead. The fixed overhead budget variance is:
A. P400 favorable C. P3,100 unfavorable A. P41,000 favorable C. P45,000 favorable
B. P400 unfavorable D. P3,100 favorable B. P41,000 Unfavorable D. P45,000 Unfavorable
56 61
. The Pinatubo Company makes and sells a single product and uses . Fixed manufacturing overhead was budgeted at P500,000 and
standard costing. During January, the company actually used 8,700 25,000 direct labor hours were budgeted. If the fixed overhead
direct labor-hours (DLHs) and produced 3,000 units of product. The volume variance was P12,000 favorable and the fixed overhead
standard cost card for one unit of product includes the following: spending variance was P16,000 unfavorable, fixed manufacturing
Variable factory overhead: 3.0 DLHs @ P4.00 per DLH overhead applied must be:
Fixed factory overhead: 3.0 DLHs @ P3.50 per DLH A. P516,000 C. P512,000
For January, the company incurred P22,000 of actual fixed overhead B. P504,000 D. P496,000
costs and recorded a P875 favorable volume variance.
62
The budgeted fixed overhead cost for January is: . CTV Company has a standard fixed cost of P6 per unit. At an actual
A. P31,500 C. P30,625 production of 8,000 units a favorable volume variance of P12,000
B. P32,375 D. P33,250 resulted. What were total budgeted fixed costs?
A. P36,000 C. P48,000
57
. The variable-overhead spending variance is P1,080, unfavorable. B. P60,000 D. P75,000
Variable overhead budgeted at 40,000 machine hours is P50,000.
63
Actual machine hours were 36,000. What was the actual variable- . Richard Company employs a standard absorption system for
overhead rate per machine hour? product costing. The standard cost of its product is as follows:
A. P1.28 C. P1.39 Raw materials P14.50
B. P1.25 D. P1.52 Direct labor (2 DLH x P8) 16.00

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Manufacturing overhead (2 DLH x P11) 22.00 (Standard input allowed for actual output achieved x the budgeted
Total standard cost P52.50 rate)
The manufacturing overhead rate is based upon a normal activity Fixed overhead P125,000
level of 600,000 direct labor hours. Richard planned to produce Variable overhead spending variance 1,200 F
25,000 units each month during the year. The budgeted annual Production volume variance 5,000 U
manufacturing overhead is:
65
Variable P 3,600,000 . If the budgeted rate for applying variable manufacturing overhead
Fixed 3,000,000 was P20 per direct labor hour, how efficient or inefficient was Tiny
P 6,600,000 Bubbles in terms of using direct labor hours as an activity base?
During November, Richard produced 26,000 units. Richard used A. 100 direct labor hours inefficient C. 100 direct labor hours
53,500 direct labor hours in November at a cost of P433,350. efficient
Actual manufacturing overhead for the month was P260,000 fixed B. 440 direct labor hours inefficient D. 440 direct labor hours
and P315,000 variable. The total manufacturing overhead applied efficient
during November was P572,000.
66
The fixed manufacturing overhead volume variance for November . The fixed overhead efficiency variance is:
is: A. P 3,000 favorable C. P 3,000 unfavorable
A. P10,000 favorable C. P10,000 unfavorable B. P10,000 unfavorable D. Never a meaningful variance
B. P3,000 unfavorable D. P22,000 favorable
Questions 67 and 68 are based on a monthly normal volume of
64
. Using the information for Richard Company in the preceding 50,000 units (100,000 direct labor hours). Raff Co.’s standard cost
number, the total variance related to efficiency of the system contains the following overhead costs:
manufacturing operation for November is: Variable P6 per unit
A. P 9,000 unfavorable C. P12,000 unfavorable Fixed P8 per unit
B. P21,000 unfavorable D. P11,000 unfavorable
The following information pertains to the month of March:
Question Nos. 65 and 66 are based on the following: Units actually produced 38,000
Tiny Bubbles Company had the following activity relating to its fixed Actual direct labor hours worked 80,000
and variable overhead for the month of July. Actual overhead incurred:
Actual costs Variable P250,000
Fixed overhead P120,000 Fixed 384,000
Variable overhead 80,000
67
. For March, the unfavorable variable overhead spending variance
Flexible budget was:
(Standard input allowed for actual output achieved x the budgeted A. P6,000 C. P12,000
rate) B. P10,000 D. P22,000
Variable overhead P 90,000
68
. For March, the fixed overhead volume variance was:
Applied A. P96,000U C. P80,000U

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B. P96,000F D. P80,000F Variable manufacturing OH P 4/DLH P16,400

Fixed manufacturing overhead P20/DLH P88,000
69
. Edney Company employs standard absorption system for product Direct labor hours 6 min/unit 4,200 hr
costing. The standard cost of its product is as follows: 71
. What is the fixed overhead spending variance?
Raw materials P14.50 A. P4,000 Favorable C. P8,000 Unfavorable
Direct labor (2 DLH x P8) 16.00 B. P8,000 Favorable D. P4,000 Unfavorable
Manufacturing overhead (2 DLH x P11) 22.00
The manufacturing overhead rate is based upon a normal activity 72
. What is the volume variance?
level of 600,000 direct labor hours. Edney planned to produce A. P4,000 Favorable C. P8,000 Favorable
25,000 units each month during the year. The budgeted annual B. P4,000 Unfavorable D. P8,000 Unfavorable
manufacturing overhead is
Variable P3,600,000 73
. How much was the variable overhead spending variance?
Fixed 3,000,000 A. P 400 Favorable C. P400 Unfavorable
During November, Edney produced 26,000 units. Edney used B. P1,200 Favorable. D. P1,200 Unfavorable
53,500 direct labor hours in November at a cost of P433,350.
Actual manufacturing overhead for the month was P260,000 fixed 74
. How much overhead efficiency variance resulted for the month of
and P315,000 variable. The total manufacturing overhead applied May?
during November was P572,000. A. P1,600 Favorable C. P1,600 Unfavorable
The variable manufacturing overhead variances for November are: B. P 800 Favorable D. P800 Unfavorable
Spending Efficiency
A. P9,000 unfavorable P3,000 unfavorable Questions 75 through 78 are based on Darf Company, which
B. P6,000 favorable P9,000 unfavorable applies overhead on the basis of direct labor hours. Two direct labor
C. P4,000 unfavorable P1,000 favorable hours are required for each product unit. Planned production for the
D. P9,000 favorable P12,000 unfavorable period was set at 9,000 units. Manufacturing overhead is budgeted at
P135,000 for the period, of which 20% of this cost is fixed. The 17,200
70
. The fixed manufacturing overhead variances for November are: hours worked during the period resulted in production of 8,500 units.
Spending Volume Variable manufacturing overhead cost incurred was P108,500 and fixed
A. P10,000 favorable P10,000 favorable manufacturing overhead cost was P28,000. Darf Company uses a four
B. P10,000 unfavorable P10,000 favorable variance method for analyzing manufacturing overhead.
C. P 6,000 favorable P 3,000 unfavorable
D. P 4,000 unfavorable P22,000 favorable 75
. The variable overhead spending variance for the period is
A. P5,300 unfavorable C. P6,300 unfavorable
The following information will be used to answer Question Nos. B. P1,200 unfavorable D. P6,500 unfavorable
71 through 74:
Garch, Inc. analyzes manufacturing overhead in the production of its only one product, CD. The 76
. The variable overhead efficiency variance (quantity) variance for
following set of information applies to the month of May, 2006: the period is
Budgeted Actual A. P5,300 unfavorable C. P1,200 unfavorable
Units produced 40,000 38,000 B. P1,500 unfavorable D. P6,500 unfavorable

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77
. The fixed overhead budget (spending) variance for the period is On your way to work this morning, the papers were laying on the seat
A. P6,300 unfavorable C. P2,500 unfavorable of your new, red convertible. As you were crossing a bridge on the
B. P1,500 unfavorable D. P1,000 unfavorable 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
78
. The fixed overhead volume (denominator) variance for the period is retrieve only one page, which contains the following information:
A. P 750 unfavorable C. P2,500 unfavorable
B. P1,500 unfavorable D. P1,000 unfavorable Standard Cost Summary
Direct materials, 6 pounds at P3 P18.0
Comprehensive 0
79
. Big Marat, Inc. began operations on January 3. Standard costs were Direct labor, 0.8 hours at P5 4.00
established in early January assuming a normal production volume Variable overhead, 0.8 hours at P3 2.40
of 160,000 units. However, Big Marat produced only 140,000 units Fixed overhead, 0.8 hours at P7 5.60
of product and sold 100,000 units at a selling price of P180 per unit P30.0
during the year. Variable costs totaled P7,000,000, of which 60% 0
were manufacturing and 40% were selling. Fixed costs totaled
P11,200,000, of which 50% were manufacturing and 50% were Total VARIANCES REPORTED
selling. Big Marat had no raw materials or work-in-process Standard Price Spendin Quantit Volume
inventories at December 31. Actual input prices and quantities per Cost or g or y or
unit of product were equal to standard. Rate Budget Efficienc
Using absorption costing, Big Marat’s income statement would show: y
A. B. C. D. Direct P405,000 P6,90 P9,000
Cost of Goods Sold at P8,200,0 P7,200,0 P6,500,0 P7,000,00 materials 0F U
Standard Cost 00 00 00 0 Direct labor 90,000 4,850 7,000 U
Overhead Volume Variance P800,000 P800,000 P700,000 P700,000 U
U F U F Variable 54,000 P1,300 F ?@
overhead
Questions No. 80 through 85 are based on the following Fixed 126,000 500 F P14,000
information: overhead U
You have recently graduated from a university and have accepted a Applied to Work in process during the period
position with Villar Company, the manufacturer of a popular consumer @ Figure obliterated.
product. During your first week on the job, the vice president has been
favorably impressed with your work. She has been so impressed, in You recall that manufacturing overhead cost is applied to production
fact, that yesterday she called you into her office and asked you to on the basis of direct labor-hours and that all of the materials
attend the executive committee meeting this morning for the purpose purchased during the period were used in production. Since the
of leading a discussion on the variances reported for last period. company uses JIT to control work flows, work in process inventories
Anxious to favorably impress the executive committee, you took the are insignificant and can be ignored.
variances and supporting data home last night to study.

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It is now 8:30 A.M. The executive committee meeting starts in just Processing hours (average per batch) 8.0
one hour; you realize that to avoid looking like a bungling fool you Inspection hours (average per batch) 1.5
must somehow generate the necessary “backup” data for the Waiting hours (average per batch) 1.5
variances before the meeting begins. Without backup data it will be Move time (average per batch) 1.5
impossible to lead the discussion or answer any questions. Units per batch 20 units
The manufacturing cycle efficiency (MCE) is:
80
. How many pounds of direct materials were purchased and used in A. 72.7% C. 64.0%
the production of 22,500 units? B. 36.0% D. 76.0%
A. 138,000 lbs. C. 135,000 lbs.
B. 132,000 lbs. D. 137,300 lbs. Throughput time
87
. Choco Company manufactures fire hydrants in Bulacan. The
81
. What was the actual cost per pound of material? following information pertains to operations during the month of
A. P3.00 C. P2.95 May:
B. P3.05 D. P3.10 Processing time (average per batch) 8.0 hours
Inspection time (average per batch) 1.5 hours
82
. How many actual direct labor hours were worked during the period? Waiting time (average per batch) 1.5 hours
A. 18,000 C. 19,400 Move time (average per batch) 1.5 hours
B. 16,600 D. 18,970 Units per batch 20 units
The throughput time is:
83
. How much actual variable manufacturing overhead cost was A. 12.5 hours C. 4.5 hours
incurred during the period? B. 8.0 hours D. 9.5 hours
A. P55,300 C. P56,900
B. P58,200 D. P59,500 Delivery cycle time
88
. Alabang Corporation is a highly automated manufacturing firm. The
84
. What is the total fixed manufacturing overhead cost in the vice president of finance has decided that traditional standards are
company’s flexible budget? inappropriate for performance measures in an automated
A. P112,500 C. P139,500 environment. Labor is insignificant in terms of the total cost of
B. P140,000 D. P125,500 production and tends to be fixed, material quality is considered
more important than minimizing material cost, and customer
85
. What were the denominator hours for last period? satisfaction is the number one priority. As a result, production and
A. 18,000 hours C. 20,000 hours delivery performance measures have been chosen to evaluate
B. 22,000 hours D. 25,000 hours performance. The following information is considered typical of the
time involved to complete and ship orders.
Productivity measures Waiting Time:
Manufacturing cycle efficiency From order being placed to start of production 8.0 days
86
. Fireout Company manufactures fire hydrants in Bulacan. The From start of production to completion 7.0 days
following information pertains to operations during the month of Inspection time 1.5 days
May: Processing time 3.0 days

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Move time 2.5 days

The Delivery Cycle Time is:
A. 22 days C. 14 days
B. 11 days D. 7 days
89
. Fixed manufacturing overhead was budgeted at P500,000 and
25,000 direct labor hours were 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

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1
. Answer: D
Nyclyn (24 ÷ 0.80 x P15) P 450.00
Salex (19.20 ÷ 0.80 x P21) 504.00
Protet (10 x P28) 280.00
Total P1,234.00

2
. Answer: C
Required inputs to be placed in process per unit of product: 2.25 ÷0.75 3.0
yards
Standard Material cost per unit of product: 3.0 x P150 P450

3
. Answer: B
Required inputs of raw materials (in pounds) (60 ÷ 0.80) 75.00
Standard price per pound (2.5 x 0.98) x 2.45
Standard materials cost per unit 183.75

4
. Answer: D
Net price per yard:
Purchase price 40.00
Freight 1.00
Purchase discount 0.03 x 40 ( 1.20)
Standard cost per yard 39.80
Standard quantity per scarf 0.475/0.95 0.50
Standard cost per scarf: 0.50 x 39.80 19.90

5
. Answer: C
Total Minutes per worker (8 hours x 60) 480
Rest Time 60
Productive minutes 420
Output per day per worker (420 ÷ 35) in 10-liter batch 12
Production hour – good units 35 min
Rest minutes (60 ÷ 12) 5 min
Minutes used for rejects (35 + 5) ÷ 5 good units 8 min
Total standard minutes per 10-good liter batch 48 Min
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
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Variance - Credit to Materials Price Variance)/Number of Units Completed

Total debits to work in process accountP51,690
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

10
. Answer: A
Actual quantity used 1,066
Add favorable quantity (209/5.5) 38
Standard quantity allowed 1,104

11
. Answer: C
Actual materials price 105,000/35,000 3.00
Standard Quantity 12,000 x 2 24,000
Standard price 60,000/24,000 2.50
Actual Quantity used: 24,000 + (2,500/2.5) 25,000
Price variance based on usage: 25,000 x (3 – 2.50) 12,500

12
. Answer: D
Actual Quantity used 14,910
Favorable Quantity 3,735/1.5 2,490
Standard Quantity allowed 17,400
Production in units 17,400/15 1,160

13
. Answer: A
AQ @ SP (3,150 x 40) P126,000
SQ @ SP (600 x 5 x 40) 120,000
Unfavorable Quantity VarianceP 6,000

14
. Answer: A
Actual quantity used (pounds) 23,500
Less: Excess pounds used (1,000 ÷ 2) 500
Standard Quantity Allowed 23,000
Alternative Solution using the formula for Usage Variance:
MUV = (AQ –SQ)SP
1,000 = (23,500 – SQ)2
1,000 ÷ 2 = 23,500 – SQ
500 = 23,500 – SQ
SQ = 23,000

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

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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
Expected yield in batch (20,160 ÷ 1,050) 19.20
Actual yield 18.50
Unfavorable yield in batch 0.70
Unfavorable yield variance (0.70 x 400) P 280

21
. Answer: D
Materials
Actual cost 127,500
Budgeted cost (8,500 @ 15) 127,500
Materials cost variance 0
Labor
AH @ SR (6,375 @ 12) 76,500
SH @ SR (8,500 @ 0.75 @ 12) 76,500
Labor Efficiency Variance 0
Actual Payroll 77,775
AH @ SR (6,375 @ 12) 76,500
Labor Rate Variance 1,275

22
. Answer: C
(AR - SR) x AH = rate variance
Therefore, the total variance (P654.50) when divided by the hourly difference
(P4.27 - P4.10) will equal the actual hours.
Actual hours (P654.50/P.17) = 3,850.
Proof: (P4.27 - P4.10) x 3,850 = P654.50

23
. Answer: A
LaborAHStd. Mix at AHDiffSRLabor Mix VarianceM4,5005,000(500)P10P
(5,000)F3,0002,50050052,5007,5007,500-P (2,500)Fav
24
. Answer: A
Labor Yield Variance:
Expected Yield 40,000
Actual Yield 36,000
Difference 4,000
Multiply by Standard labor cost per unit P1.5625*
Yield Variance P6,250U
*Standard cost ÷ Standard Yield = P6,250 ÷ 4,000 = P1.5625
25
. Answer: C
Direct labor cost at standard rate 7,150 – 750 6,400
Standard rate 6,400/800 8.00

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26
. Answer: A
Actual cost 10,000
Favorable Rate Variance 1,000
Actual hours @ standard rate 11,000
Standard Rate: 11,000 ÷ 2,000 5.50
Expected yield (400,000 units / 750 hrs) 7,500 = 40,000

27
. Answer: C
LEV: (20,000 – 21,000)6.15 = (6,150)F
Standard Rate:
3,000 = 126,000 – 20,000SR
123,000 = 20,000SR
SR = 6.15

28
. Answer: C
LEV: (410 x 20) – 8,440 = (240)F

29
. Answer: C
Actual hours 1,148,000/16.40 70,000
Less Unfavorable hours 120,000/16 7,500
Standard hours allowed 62,500
Standard rate: 960,000/60,000 16.00

30
. Answer: B
SR = LEV ÷ (AH – SH)
= -4,000 ÷ (29,000 – 30,000)
= P4.00

31
. Answer: C
AR = SR – (LRV ÷ AH)
AR = P4.00 – (5,800 ÷ 29,000)
= P3.80

32
. Answer: B
Variable OH rate/hr - P27,000 ÷ 45,000 P 0.60
Direct labor rate/hr = P0.60 ÷ 0.20 P 3.00
Variable OH is applied at 20% of direct labor cost
Actual hours P140,700 ÷ (P3 – P0.20) 50,250
Unfavorable hours P5,100 ÷ P3 1,700
SH allowed 48,550

33
. Answer: B
Actual direct labor costs P241,500
Actual hrs at std labor rate (34,500 x P6.4) 220,800
Unfavorable labor rate variance P 20,700
Standard labor rate:
-3,200 = (34,500 – 35,000) SR
3,200 = 500SR
SR = 6.40

34
. Answer: B
Actual hours = Labor rate variance ÷(AR-SR)
P12,000 ÷ (P10 – P9) 12,000 hours

35
. Answer: D

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LRV = AH(AR – SR)

-5,500 = 10,000(7.50 – SR)
-5,500 ÷ 10,000 = 7.5 – SR
-0.55 = 7.50 – SR
SR = 8.05

36
. Answer: D
The controllable variance is the sum of the spending variances plus the efficiency
variance.
Variable overhead spending variance P( 3,600)
Fixed overhead spending variance P(10,000)
Variable overhead efficiency variance P 6,000
Total controllable variance P 7,600
The volume variance is not considered a controllable variance.

37
. Answer: A
Monthly budgeted fixed overhead (150,000/12) 12,500
Applied fixed overhead (2,450 x 2 x 2.5)12,250
Unfavorable volume variance 250

38
. Answer: A
Variable OH per DLH 48,000/24,000 2.00
Actual overhead 147,000
Budgeted OH at standard hours:
Variable 21,000 x 2 42,000
Fixed 108,000 150,000
Favorable controllable/budget variance ( 3,000)

39
. Answer: A
Budgeted fixed overhead 81,000
Applied fixed overhead based on 80% achieved (24,000 x 3)72,000
Unfavorable volume variance 9,000
Fixed overhead rate based on 27,000 hours: (81,000 ÷ 27,000) 3.00
40
. Answer: D
Actual overhead 230,000
Less Budgeted OH at standard hours
Variable32,000 x 5 160,000
Fixed 64,000 (224,000)
Unfavorable budget variance 6,000

41
. Answer: C
Actual overhead 14,000
Budget at SH 15,600
Favorable controllable variance ( 1,600)

42
. Answer: C
OH application rate based on DL cost 600,000/(50,000 x 6) 200%
Applied overhead 325,000 x 2 650,000
Actual overhead 620,000
Overapplied Overhead 30,000

43
. Answer: D
Actual overhead 230,000
Budget at standard hours:
Fixed OH 64,000

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Variable OH (32,000 x 5) 160,000 224,000

Unfavorable controllable variance 6,000

44
. Answer: B
Budgeted fixed overhead (30,000 x 2) 60,000
Applied FOH (25,000 x 2) 50,000
Unfavorable volume variance 10,000

45
. Answer: C
Efficiency variance = (AH – SH) x SVOHR (14,000 – 13,500) 6 = 3,000 UNF
Standard hours: 4,500 x 3 13,500

46
. Answer: D
Efficiency Variance = (31,500 – 30,000) 1015,000 Unfavorable
Standard hours: 20,000 units x 1.5 hours

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) 63,000U
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)
AH @ SVOHR 540,000
SH @ SVOH (260,000 x 2) 520,000
Unfavorable VOH efficiency variance 20,000

53
. Answer: D
Actual P10,100
Budget (4,500 x 2.40) 10,800
Favorable Budget variance P( 700)

54
. Answer: C

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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 variance12,000
Budgeted fixed overhead 36,000

59
. Answer: A
Unfavorable volume variance 25,000
Unfavorable VOH spending variance18,000
Total 43,000
Net Unfavorable variance 2,000
Favorable fixed OH budget variance41,000

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 variance12,000
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) 812,000
Variable OH Efficiency (53,500 – 52,000) 6 9,000
Total efficiency variance 21,000

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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
Budgeted (denominator) hours (40,000 units x 6 ÷ 60) 4,000

72
. Answer: B
Budget fixed overhead P80,000
Applied fixed overhead (38,000 x 0.10 x P20) 76,000
Unfavorable volume variance P 4,000

73
. 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

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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.
Budgeted fixed overhead (135,000 x 0.2) 27,000
Applied fixed overhead (8,500 x 3) 25,500
Underapplied (unfavorable) volume variance 1,500
Alternative calculation: (9,000 – 8,500) x 3 1,500
Fixed overhead per unit (27,000 ÷ 9,000) 3

79
. Answer: C
Std unit cost:
Variable (7,000,000 x 0.60) ÷ 140,000 P30
Fixed OH (11,200,000 x 0.50) ÷ 160,000 35
Std unit cost P65
CGS – Std (100,000 x 65) 6,500,000
OH Volume Variance: (160,000 – 140,000) x 35 P 700,000 UNF

80
. Answer: A
SQ allowed (22,500 x 6) 135,000
Unfavorable usage variance 3,000
Actual quantity of materials 138,000

81
. Answer: C
Actual quantity purchased and used at standard price (138,000 x 3) 414,000
Favorable price variance 6,900
Actual Quantity @ Actual Price 407,100
Actual Price (407,100 ÷ 138,000) P2.95

82
. Answer: C
SH @ SR 90,000
Efficiency Variance 7,000
AH @ SR 97,000
Actual hours (97,000 ÷ 5) 19,400

83
. Answer: D
AH @ SR (19,400 x 3) 58,200
Spending variance 1,300
Actual Variable Overhead 59,500

84
. Answer: B
Applied Fixed OH 126,000
Underapplied fixed overhead 14,000
Budgeted fixed overhead 140,000

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85
. Answer: C
Denominator or Budgeted Hours: (140,000 ÷ 7) = 20,000

86
. Answer: C
MCE = Value Added Hours ÷ Throughput Time
Processing hours 8.00
Inspection hours 1.50
Waiting time 1.50
Move time 1.50
Throughput time 12.50
MCE (8.00 ÷ 12.50) 64%

87
. Answer: A

88
. Answer: A
Delivery cycle time:
Total waiting time 15.00
Inspection time 1.50
Processing time 3.00
Move time 2.50
Delivery Cycle Time 22.00

89
. Answer: C
A favorable volume variance arises when the applied fixed overhead is higher than
the budgeted fixed overhead.
Budgeted fixed overhead 500,000
Favorable volume variance (overapplied) 12,000
Applied fixed overhead 512,000

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