Management Accounting Review

Quizzer on Standard Costing and Variance Analysis Problem Solving

***Questions 1 4 are based on the following information. Marshall Enterprises uses a standard cost
system in its small appliance division. The standard cost of manufacturing one unit of Kimball is as
follows:
Materials 60 lbs. at P1.50 per pound P90
Labor 3 hours at P12 per hour P36
Factory Overhead 3 hours at P8 per hour P24

The budgeted variable factory overhead rate is P3 per labor hour and the budgeted fixed factory overhead is
P27,000 per month. During May, Marshall produced 1,650 units of Marshall compared with a normal
capacity of 1,800 units. The actual cost per unit was as follows:

Materials (purchased and used) P95.70

(58 lbs. at P1.65 @)
Labor (3.1 hours at P12 per hour) 37.20
Factory overhead (P39,930 per 1,650 units) 24.20
----------
Total actual cost per unit P157.10
======
1. The total materials quantity variance for May is:
a. P14,355 favorable
b. P14,355 unfavorable
c. P4,950 favorable
d. P4,950 unfavorable

2. The materials price variance for May is:

a. P14,355 unfavorable
b. P14,850 unfavorable
c. P14,355 favorable
d. P14,850 favorable

3. The labor rate variance for May is:

a. P1,920 favorable
b. P0
c. P4,950 unfavorable
d. P4,950 favorable

4. The flexible budget overhead variance for May is:

a. P3,270 unfavorable
b. P3,270 favorable
c. P1,920 unfavorable
d. P1,920 favorable

5. Data on Golden Companys direct labor costs is given below:

Standard direct labor hours 30,000

Actual direct labor hours 29,000
Direct labor usage (efficiency ) variance favorable P4,000
Direct labor rate variance favorable P5,800
Total payroll P110,200

What was Goldens actual direct labor rate?

a. P3.60
b. P3.80
c. P4.00
d. P5.80

6. What was Goldens standard direct labor rate?

a. P3.54
b. P3.80
c. P4.00
d. P5.80
 For Questions 7-9: Nanjones Company manufactures a line of products distributed nationally through
wholesalers. Presented below are planned manufacturing data for 200A and actual data for November
200A. The company applies overhead based on planned machine hours using a predetermined annual rate:

200A Planning Data

Annual November
Fixed factory overhead P1,200,000 P100,000
Variable factory overhead 2,400,000 220,000
Direct labor hours 48,000 4,000
Machine hours 240,000 22,000

Data for November 200A

Direct labor hours (actual) 4,200
Direct labor hours (plan based on output) 4,000
Machine hours (actual) 21,600
Machine hours (plan based on output) 21,000
Fixed factory overhead P101,200
Variable factory overhead P214,000

7. The total amount of factory overhead applied to production for November is:
a. P315,200
b. P315,000
c. P300,000
d. P324,000

8. The variable factory overhead spending variance for November was:

a. P2,000 favorable
b. P6,000 favorable
c. P14,000 unfavorable
d. P6,000 unfavorable

9. The fixed factory overhead volume variance for November was:

a. P1,200 unfavorable
b. P5,000 unfavorable
c. P5,000 favorable
d. P1,200 favorable

For Questions 10-12 Shakers Company shows the following:

200A 200B
Net Sales P192,500 P210,210
Cost of Goods Sold 115,500 165,400
Gross Profit P 77,000 P 44,810

Unit sales price decreased by 22%

10. The decrease in sales due to change in price was:

a. P59,290
b. P17,710
c. P28,536
d. P37,907

11. The change in cost of goods sold due to change in quantity sold was:
a. P46,651
b. P3,700
c. P46,200
d. P42,500

12. The % increase in quantity sold in 200B was:

a. 22%
b. 25%
c. 30%
d. 40%

13. Labba Corporation has a standard absorption and flexible budgeting system and uses a two-way
analysis of overhead variances. Selected data for February 2002 production activity is as follows:
Budgeted fixed factory overhead costs P 64,000
Actual factory overhead incurred P230,000
 Variable factory overhead rate per direct labor hour P 5.00
Standard direct labor hours 32,000
Actual direct labor hours 33,000

The budget (controllable) variance for February is

a. P1,000 F
b. P6,000 F
c. P1,000 U
d. P6,000 U

14. A company has a production capacity of 10,000. The master budget for the current year included
scheduled production of 8,100 units and scheduled sales of 7,500 units. Actual production was 8,000
units and actual sales were 7,200 units. Each unit costs P15 and sells for P20. The unfavorable sales
revenue variance that should be reported for the marketing department is
a. P16,000.
b. P18,000.
c. P 4,500.
d. P 6,000.

The following information relates to a given department of Haven Company for the fourth quarter of 200A:
Actual total overhead (fixed and variable) P178,500
Budget Formula P110,000 + P0.50 per hour
Total overhead application rate P1.50
Spending variance P8,000 unfavorable
Volume variance P5,000 favorable

The company uses the 3-way variance analysis method.

15. What were the actual hours worked in this department during the quarter?
a. 110,000
b. 137,000
c. 121,000
d. 153,000

16. Cox Company's direct material costs for the month of January were as follows:

Actual quantity purchased ............. 18,000 kilograms

Actual unit purchase price ............ P 3.60 per kilogram
Materials price variance-- unfavorable (based on purchases) .... P 3,600
Standard quantity allowed for actual production ............... 16,000 kilograms
Actual quantity used .................. 15,000 kilograms

For January there was a favorable direct material quantity variance of:
a. P3,360.
b. P3,375.
c. P3,400.
d. P3,800.

17. The Porter Company has a standard cost system. In July the company purchased and used 22,500
pounds of direct material at an actual cost of P53,000; the materials quantity variance was P1,875
Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds.
The materials price variance for July was:
a. P2,725 F.
b. P2,725 U.
c. P3,250 F.
d. P3,250 U.

18. Information on Kennedy Company's direct material costs follows:

Standard price per pound of raw materials ....... P3.60
Actual quantity of raw materials purchased ...... 1,600 pounds
Standard quantity allowed for actual production.. 1,450 pounds
Materials purchase price variance--favorable .... P 240

What was the actual purchase price per unit, rounded to the nearest centavo?
a. P3.06.
b. P3.11.
c. P3.45.
d. P3.75.
 19. The Fletcher Company uses standard costing. The following data are available for October:
Actual quantity of direct materials used ... 23,500 pounds
Standard price of direct materials ......... P2 per pound
Material quantity variance ................. P1,000 favorable

The standard quantity of material allowed for October production is:

a. 23,000 lbs.
b. 24,000 lbs.
c. 24,500 lbs.
d. 25,000 lbs.

20. Lab Corp. uses a standard cost system. Direct labor information for Product CER for the month of
October follows:
Standard direct labor rate ................. P6.00 per hour
Actual direct labor rate paid .............. P6.10 per hour
Standard hours allowed for actual production 1,500 hours
Labor efficiency variance--unfavorable ..... P600

What are the actual hours worked?

a. 1,400.
b. 1,402.
c. 1,598.
d. 1,600.

21. For the month of April, Thorp Co.'s records disclosed the following data relating to direct labor:
Actual cost ............... P10,000
Rate variance ............. P 1,000 favorable
Efficiency variance ....... P 1,500 unfavorable

For the month of April, actual direct labor hours amounted to 2,000. In April, Thorp's standard direct labor
rate per hour was:
a. P5.50.
b. P5.00.
c. P4.75.
d. P4.50.

Questions 22-24. The Clark Company makes a single product and uses standard costing. Some data
concerning this product for the month of May follow:

Labor rate variance:.................................. P 7,000 F

Labor efficiency variance:............................ P12,000 F
Variable overhead efficiency variance:................ P 4,000 F
Number of units produced:............................. 10,000
Standard labor rate per direct labor hour:............ P12
Standard variable overhead rate per direct labor hour: P4
Actual labor hours used:.............................. 14,000
Actual variable manufacturing overhead costs:......... P58,290

22. The actual direct labor rate for May in pesos per hour was:
a. P12.50.
b. P12.00.
c. P11.75.
d. P11.50.

23. The total standard cost for direct labor for May was
a. P168,000.
b. P180,000.
c. P120,000.
d. P161,000.

24. The standard hours allowed to make one unit of finished product are:
a. 1.0.
b. 1.2.
c. 1.5.
d. 2.0.
 25. Web Company uses a standard cost system in which manufacturing overhead is applied to units of
product on the basis of machine hours. During February, the company used a denominator activity of
80,000 machine hours in computing its predetermined overhead rate. However, only 75,000 standard
machine hours were allowed for the month's actual production. If the fixed overhead volume
variance for February was P6,400 unfavorable, then the total budgeted fixed overhead cost for the
month was:
a. P96,000.
b. P102,400.
c. P100,000.
d. P98,600.
26. Solo Corporation recently purchased 25,000 gallons of direct material at P5.60 per gallon. Usage by
the end of the period amounted to 23,000 gallons. If the standard cost is P6.00 per gallon and the
company believes in computing variances at the earliest point possible, the direct-material price
variance would be calculated as:
a. P800F.
b. P9,200F.
c. P9,200U.
d. P10,000F.
e.
Use the following to answer questions 27-28:

The following data relate to product no. 89 of Des Moines Corporation:

Direct material standard: 3 square feet at P2.50 per square foot

Direct material purchases: 30,000 square feet at P2.60 per square foot
Direct material consumed: 29,200 square feet
Manufacturing activity, product no. 89: 9,600 units completed

27. The direct-material quantity variance is:

a. P1,000F.
b. P1,000U.
c. P1,040F.
d. P1,040U.
e.
28. The direct-material price variance is:
a. P2,880U.
b. P2,920F.
c. P2,920U.
d. P3,000U.

Use the following to answer questions 29-30:

The following data relate to product no. 33 of La Quinta Corporation:

Direct labor standard: 5 hours at P14 per hour
Direct labor used in production: 45,000 hours at a cost of P639,000
Manufacturing activity, product no. 33: 8,900 units completed

29. The direct-labor rate variance is:

a. P8,900F.
b. P8,900U.
c. P9,000F.
d. P9,000U.
e.
30. The direct-labor efficiency variance is:
a. P7,000F.
b. P7,000U.
c. P7,100F
d. P7,100U.

31. Simms Corporation had a favorable direct-labor efficiency variance of P6,000 for the period just
ended. The actual wage rate was P0.50 more than the standard rate of P12.00. If the company's
standard hours allowed for actual production totaled 9,500, how many hours did the firm actually
work?
a. 9,000.
b. 9,020.
c. 9,980.
d. 10,000.
 32. Arling Company, which applies overhead to production on the basis of machine hours, reported The
following data for the period just ended:

Actual units produced: 12,000

Actual fixed overhead incurred: P730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: P720,000
Planned level of machine-hour activity: 50,000

If it takes four hours to manufacture a completed unit, the company's standard fixed overhead rate per
machine hour would be:
a. P12.00.
b. P14.40.
c. P14.60.
d. P15.00.

33. Herman Company, which applies overhead to production on the basis of machine hours, reported the
following data for the period just ended:
Actual units produced: 13,000
Actual fixed overhead incurred: P742,000
Standard fixed overhead rate: P15 per hour
Budgeted fixed overhead: P720,000
Planned level of machine-hour activity: 48,000

If it takes four hours to manufacture a completed unit, the company's fixed-overhead volume variance
would be:
a. P0.
b. P22,000 favorable.
c. P60,000 favorable.
d. P22,000 unfavorable.

34. Luke, Inc., has a standard variable overhead rate of P5 per machine hour, with each completed unit
expected to take three machine hours to produce. A review of the company's accounting records
found the following:
Actual production: 19,500 units
Variable-overhead efficiency variance: P9,000U
Variable-overhead spending variance: P21,000F

What was Luke's actual variable overhead during the period?

a. P262,500.
b. P280,500.
c. P304,500.
d. P322,500.

35. Bushnell, Inc., has a standard variable overhead rate of P4 per machine hour, with each completed
unit expected to take three machine hours to produce. A review of the company's accounting records
found the following:
Actual variable overhead: P210,000
Variable-overhead efficiency variance: P18,000U
Variable-overhead spending variance: P30,000F

How many units did Bushnell actually produce during the period?
a. 13,500.
b. 16,500.
c. 18,500.
d. 21,500.