The standard direct labor cost per 10-gallon batch of sherbet is:

A. P50.00 C. P25.00
B. P28.75 D. P15.00

Materials variance
i. Under a standard cost system, the materials quantity variance was recorded at P1,970 unfavorable, the
materials price variance was recorded at P3,740 favorable, and the Goods in Process was debited for P51,690.
Ninety-six thousand units were completed. What was the per unit price of the actual materials used?
A. P0.52 each C. P0.54 eac
B. P0.53 each D. P0.51 each

ii. Blake Company has a standard price of P5.50 per pound for materials. July’s results showed an unfavorable
material price variance of P44 and a favorable quantity variance of P209. If 1,066 pounds were used in
production, what was the standard quantity allowed for materials?
A. 1,104 C. 1,066
B. 1,074 D. 1,100

iii. Elite Company uses a standard costing system in the manufacture of its single product. The 35,000 units of raw
material in inventory were purchased for P105,000, and two units of raw material are required to produce one
unit of final product. In November, the company produced 12,000 units of product. The standard allowed for
material was P60,000, and there was an unfavorable quantity variance of P2,500. The materials price variance
for the units used in November was
A. P 2,500 U C. P12,500 U
B. P11,000 U D. P 3,500 F

iv. Sheridan Company has a standard of 15 parts of component BB costing P1.50 each. Sheridan purchased
14,910 units of component BB for P22,145. Sheridan generated a P220 favorable price variance and a P3,735
favorable quantity variance. If there were no changes in the component inventory, how many units of finished
product were produced?
A. 994 units. C. 1,000 units
B. 1,090 units. D. 1,160 units

v. The standard usage for raw materials is 5 pounds at P40.00 per pound. Cave Company spent P131,200 in
purchasing 3,200 pounds. Cave used 3,150 pounds to produce 600 units of finished product. The material
quantity variance is:
A. P6,000 unfavorable C. P3,200 unfavorable
B. P5,200 unfavorable D. P2,000 unfavorable

vi. The Bohol 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 U
The standard quantity of materials allowed for October production is:
A. 23,000 lbs C. 24,000 lbs
B. 24,500 lbs D. 25,000 lbs

vii. Information on Dulce’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 P 3,000
Standard quantity of direct materials allowed for May production 29,000 lbs
 For the month of May, Dulce’s direct materials price variance was:
A. P2,800 favorable C. P2,800 unfavorable
B. P6,000 unfavorable D. P6,000 favorable

viii. Information on Katrina Company’s direct material costs is as follows:

Standard unit price P 3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price variance – favorable P 240
What was the actual purchase price per unit, rounded to the nearest centavos?
A. P3.06 C. P3.11
B. P3.45 D. P3.75

ix. Palmas Company, which has a standard cost system, had 500 units of raw material X in its inventory at June 1,
purchased in May for P1.20 per unit and carried at a standard cost of P1.00. The following information pertains
to raw material X for the month of June:
Actual number of units purchased 1,400
Actual number of units used 1,500
Standard number of units allowed for actual production 1,300
Standard cost per unit P1.00
Actual cost per unit P1.10
The unfavorable materials purchase price variance for raw material X for June was:
A. P 0 C. P140
B. P130 D. P150

x. During March, Lumban Company’s direct material costs for the manufacture of product T were as follows:
Actual unit purchase price P6.50
Standard quantity allowed for actual production 2,100
Quantity purchased and used for actual production 2,300
Standard unit price P6.25
Lumban’s material usage variance for March was:
A. P1,250 unfavorable C. P1,250 favorable
B. P1,300 unfavorable D. P1,300 favorable

xi. Razonable Company installs shingle roofs on houses. The standard material cost for a Type R house is P1,250,
based on 1,000 units at a cost of P1.25 each. During April, Razonable installed roofs on 20 Type R houses,
using 22,000 units of material cost of P26,400. Razonable’s material price variance for April is:
A. P1,000 favorable C. P1,100 favorable
B. P1,400 unfavorable D. P2,500 unfavorable

xii. Samson Candle Co. manufactures candles in various shapes, sizes, colors, and scents. Depending on the
orders received, not all candles require the same amount of color, dye, or scent materials. Yields also vary,
depending upon the usage of beeswax or synthetic wax. Standard ingredients for 1,000 pounds of candles are:
Input: Standard Mix Standard Cost per Pound
Beeswax 200 lbs. 1.00
Synthetic wax 840 lbs. 0.20
Colors 7 lbs. 2.00
Scents 3 lbs. 6.00
Totals 1,050 lbs. 9.20
Standard output 1,000 lbs.
 Price variances are charged off at the time of purchase. During January, the company was busy manufacturing
red candles for Valentine’s Day. Actual production then was:
Input: In Pounds
Beeswax 4,100
Synthetic wax 13,800
Colors 2,200
Scents 60
Total 20,160
Actual output 18,500
The material yield variance is:
A. P 280 unfavorable C. P 280 favorable
B. P3,989 unfavorable D. P3,989 favorable

Labor variance
xiii. The flexible budget for the month of May 2007 was for 9,000 units with direct material at P15 per unit. Direct

labor was budgeted at 45 minutes per unit for a total of P81,000. Actual output for the month was 8,500 units
with P127,500 in direct material and P77,775 in direct labor expense. Direct labor hours of 6,375 were actually
worked during the month. Variance analysis of the performance for the month of May would show a(n):
A. Favorable material quantity variance of P7,500.
B. Unfavorable direct labor efficiency variance of P1,275.
C. Unfavorable material quantity variance of P7,500.
D. Unfavorable direct labor rate variance of P1,275.

xiv. The standard hourly rate was P4.10. Standard hours for the level of production are 4,000. The actual rate was
P4.27. The labor rate variance was P654.50, unfavorable. What were the actual labor hours?
A. 3,700 C. 3,850
B. 4,150 D. 4,000

xv. Clean Harry Corp. uses two different types of labor to manufacture its product. The types of labor, Mixing and
Finishing, have the following standards:
Labor Type Standard Mix Std Hourly Rate Standard Cost
Mixing 500 hours P10 P5,000
Finishing 250 hours P5 P1,250
Yield: 4,000 units
During January, the following actual production information was provided:
Labor Type Actual Mix
Mixing 4,500 hours
Finishing 3,000 hours
Yield: 36,000 units
What is the labor mix variance?
A. P2,500 F C. P2,500 U
B. P5,000 F D. P5,000 F

xvi. How much labor yield variances should be reported?

A. P6,250 U C. P5,250 F
B. P6,250 F D. P5,250 U

xvii. Hingis had a P750 unfavorable direct labor rate variance and an P800 favorable efficiency variance. Hingis paid
P7,150 for 800 hours of labor. What was the standard direct labor wage rate?
A. P8.94 C. P8.00
 B. P7.94 D. P7.80

xviii. Powerless Company’s operations for April disclosed the following data relating to direct labor:
Actual cost P10,000
Rate variance 1,000 favorable
Efficiency variance 1,500 unfavorable
Standard cost P 9,500
Actual direct labor hours for April amounted to 2,000. Powerless’ standard direct labor rate per hour in April was:
A. P5.50 C. P5.00
B. P4.75 D. P4.50

xix. Lion Company’s direct labor costs for the month of January were as follows:
Actual direct labor hours 20,000
Standard direct labor hours 21,000
Direct labor rate variance – Unfav. P 3,000
Total payroll P126,000
What was Lion’s direct labor efficiency variance?
A. P6,000 favorable C. P6,150 favorable
B. P6,300 favorable D. P6,450 favorable

xx. Using the information given below, determine the labor efficiency variance:
Labor price per hour P 20
Standard labor price per gallon of output at 20 gal./hr P 1
Standard labor cost of 8,440 gallons of actual output P8,440
Actual total inputs(410 hours at P21/hr) P8,610
A. P 410 unfavorable C. P 240 favorable
B. P 170 unfavorable D. P 410 favorable

xxi. Simbad Company’s operations for the month just ended originally set up a 60,000 direct labor hour level, with
budgeted direct labor of P960,000 and budgeted variable overhead of P240,000. The actual results revealed
that direct labor incurred amounted to P1,148,000 and that the unfavorable variable overhead variance was
P40,000. Labor trouble caused an unfavorable labor efficiency variance of P120,000, and new employees hired
at higher rates resulted in an actual average wage rate of P16.40 per hour. The total number of standard direct
labor hours allowed for the actual units produced is
A. P52,500 C. P62,500
B. P77,500 D. P70,000

Questions 30 and 31 are based on the following information.

Information on Goodeve Company’s direct labor costs are presented below:
Standard direct labor hours 30,000
Actual direct labor hours 29,000
Direct labor efficiency variance Favorable P 4,000
Direct labor rate variance Favorable P 5,800
Total payroll P110,200

xxii. What was Goodeve’s standard direct labor rate?

A. P3.54 C. P3.80
B. P4.00 D. P5.80

xxiii. What was Goodeve’s actual direct labor rate?

A. P3.60 C. P3.80
 B. P4.00 D. P5.80

xxiv. The Islander Corporation makes a variety of leather goods. It uses standards costs and a flexible budget to aid
planning and control. Budgeted variable overhead at a 45,000-direct labor hour level is P27,000.
During April material purchases were P241,900. Actual direct-labor costs incurred were P140,700. The direct-
labor usage variance was P5,100 unfavorable. The actual average wage rate was P0.20 lower than the average
standard wage rate.
The company uses a variable overhead rate of 20% of standard direct-labor cost for flexible budgeting purposes.
Actual variable overhead for the month was P30,750.
What were the standard hours allowed during the month of April?
A. 50,250 C. 58,625
B. 48,550 D. 37,520

xxv. Information on Barber Company’s direct labor costs for the month of January is as follows:
Actual direct labor hours 34,500
Standard direct labor hours 35,000
Total direct labor payroll P241,500
Direct labor efficiency variance – favorable P 3,200
What is Barber’s direct labor rate variance?
A. P17,250 U C. P21,000 U
B. P20,700 U D. P21,000 F

xxvi. STA Company uses a standard cost system. The following information pertains to direct labor costs for the
month of June:
Standard direct labor rate per hour P 10.00
Actual direct labor rate per hour P 9.00
Labor rate variance (favorable) P12,000
Actual output (units) 2,000
Standard hours allowed for actual production 10,000 hours
How many actual labor hours were worked during March for STA Company?
A. 10,000 C. 8,000
B. 12,000 D. 10,500

xxvii. Information of Hanes’ direct labor costs for the month of May is as follows:
Actual direct labor rate P7.50
Standard direct labor hours allowed 11,000
Actual direct labor hours 10,000
Direct labor rate variance – favorable P5,500
What was the standard direct labor rate in effect for the month of May?
A. P6.95 C. P8.00
B. P7.00 D. P8.05

Two-way overhead variance

xxviii. The overhead variances for Big Company were:

Variable overhead spending variance: P3600 favorable.

Variable overhead efficiency variance: P6,000 unfavorable.
Fixed overhead spending variance: P10,000 favorable.
Fixed overhead volume variance: P24,000 favorable.
What was the overhead controllable variance?
A. P31,600 favorable C. P24,000 favorable
B. P13,600 favorable D. P 7,600 favorable
xxix. Kent Company sets the following standards for 2007:
Direct labor cost (2 DLH @ P4.50) P 9.00
Manufacturing overhead (2 DLH @ P7.50) 15.00
Kent Company plans to produce its only product equally each month. The annual budget for overhead costs
are:
Fixed overhead P150,000
Variable overhead 300,000
Normal activity in direct labor hours 60,000
In March, Kent Company produced 2,450 units with actual direct labor hours used of 5,050. Actual overhead
costs for the month amounted to P37,245 (Fixed overhead is as budgeted.)
The amount of overhead volume variance for Kent Company is
A. P250 unfavorable C. P500 unfavorable
B. P750 Unfavorable D. P375 Unfavorable

xxx. Calma Company uses a standard cost system. The following budget, at normal capacity, and the actual results
are summarized for the month of December:
Direct labor hours 24,000
Variable factory OH P 48,000
Fixed factory OH P108,000
Total factory OH per DLH P 6.50
Actual data for December were as follows:
Direct labor hours worked 22,000
Total factory OH P147,000
Standard DLHs allowed for capacity attained 21,000
Using the two-way analysis of overhead variance, what is the controllable variance for December?
A. P 3,000 Favorable C. P 5,000 Favorable
B. P 9,000 Favorable D. P10,500 Unfavorable

xxxi. Heart Company uses a flexible budget system and prepared the following information for the year:
Percent of Capacity 80 Percent 90 Percent
Direct labor hours 24,000 27,000
Variable factory overhead P 54,000 P 60,750
Fixed factory overhead P 81,000 P 81,000
Total factory overhead rate per DLH P5.625 P5.25
Heart operated at 80 percent of capacity during the year, but applied factory overhead based on the 90 percent
capacity level. Assuming that actual factory overhead was equal to the budgeted amount of overhead, how
much was the overhead volume variance for the year?
A. P 9,000 unfavorable C. P 9,000 favorable
B. P15,750 unfavorable D. P15,750 favorable

xxxii. The Fire Company has a standard absorption and flexible budgeting system and uses a two-way analysis of
overhead variances. Selected data for the June production activity are:
Budgeted fixed factory overhead costs P 64,000
Actual factory overhead 230,000
Variable factory overhead rater per DLH P 5
Standard DLH 32,000
Actual DLH 32,000
The budget (controllable) variance for June is
A. P1,000 favorable C. P1,000 unfavorable
B. P6,000 favorable D. P6,000 unfavorable
xxxiii. Sorsogon Company had actual overhead of P14,000 for the year. The company applied overhead of P13,400. If
the overhead budgeted for the standard hours allowed is P15,600, the overhead controllable variance is
A. P 600 Favorable C. P1,600 Favorable
B. P2,200 Unfavorable D. P1,600 Unfavorable

xxxiv. Compo Co. uses a predetermined factory O/H application rate based on direct labor cost. For the year ended
December 31, Compo’s budgeted factory O/H was P600,000, based on a budgeted volume of 50,000 direct
labor hours, at a standard direct labor rate of P6 per hour. Actual factory O/H amounted to P620,000, with actual
direct labor cost of P325,000. For the year, over-applied factory O/H was
A. P20,000 C. P30,000
B. P25,000 D. P50,000

xxxv. The Terrain Company has a standard absorption and flexible budgeting system and uses a two-way analysis of
overhead variances. Selected data for the June production activity are:
Budgeted fixed factory overhead costs P 64,000
Actual factory overhead 230,000
Variable factory overhead rater per DLH P 5
Standard DLH 32,000
Actual DLH 32,000
The budget (controllable) variance for the month of June is:
A. P1,000 favorable C. P1,000 unfavorable
B. P6,000 favorable D. P6,000 unfavorable

xxxvi. The standard factory overhead rate is P10 per direct labor hour (P8 for variable factory overhead and P2 for
fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual
cost of factory overhead for the production of 5,000 units during May were as follows:
Standard: 25,000 hours at P10 P250,000
Actual: Variable factory overhead 202,500
Fixed factory overhead 60,000
What is the amount of the factory overhead volume variance?
A. 12,500 favorable C. 12,500 unfavorable
B. 10,000 unfavorable D. 10,000 favorable

Three-way overhead variance

xxxvii. The following data are the actual results for Wow Company for the month of May:

Actual output 4,500 units

Actual variable overhead P360,000
Actual fixed overhead P108,000
Actual machine time 14,000 MH
Standard cost and budget information for Wow Company follows:
Standard variable overhead rate P6.00 per MH
Standard quantity of machine hours 3 hours per unit
Budgeted fixed overhead P777,600 per year
Budgeted output 4,800 units per month
The overhead efficiency variance is
A. P3,000 Favorable C. P3,000 Unfavorable
B. P5,400 Favorable D. P5,400 Unfavorable

xxxviii.The Libiran Company produces its only product, Menthol Chewing Gum. The standard overhead cost for one
pack of the product follows:
 Fixed overhead (1.50 hours at P18.00) P27.00
Variable overhead (1.50 hours at P10.00) 15.00
Total application rate P42.00
Libiran uses expected volume of 20,000 units. During the year, Libiran used 31,500 direct labor hours for the
production of 20,000 units. Actual overhead costs were P545,000 fixed and P308,700 variable.
The overhead efficiency variance is
A. P22,500 Favorable C. P15,000 Favorable
B. P22,500 Unfavorable D. P15,000 Unfavorable

xxxix. Abbey Company produces a single product. Abbey employs a standard cost system and uses a flexible budget
to predict overhead costs at various levels of activity. For the most recent year, Abbey used a standard
overhead rate equal to P8.50 per direct labor hour. The rate was computed using normal activity. Budgeted
overhead costs are P100,000 for 10,000 direct labor hours and P160,000 for 20,000 direct labor hours. During
the past year, Abbey generate the following data:
Actual production: 1,400 units
Fixed overhead volume variance: P5,000 U
Variable overhead efficiency variance: P3,000 F
Actual fixed overhead costs: P42,670
Actual variable overhead costs: P82,000
The number of direct labor hours used as normal activity are:
A. 16,000 C. 14,000
B. 15,000 D. 13,500

xl. Using the information presented below, calculate the total overhead spending variance.
Budgeted fixed overhead P10,000
Standard variable overhead (2 DLH at P2 per DLH) P4 per unit
Actual fixed overhead P10,300
Actual variable overhead P19,500
Budgeted volume (5,000 units x 2 DLH) 10,000 DLH
Actual direct labor hours (DLH) 9,500
Units produced 4,500
A. P 500 U C. P1,000 U
B. P 800 U D. P1,300 U

xli. The following data are the actual results for Bustos Company for the month of May:
Actual output 4,500 units
Actual variable overhead P360,000
Actual fixed overhead P108,000
Actual machine time 14,000 MH
Standard cost and budget information for Bustos Company follows:
Standard variable overhead rate P6.00 per MH
Standard quantity of machine hours 3 hours per unit
Budgeted fixed overhead P777,600 per year
Budgeted output 4,800 unit per month
The overhead efficiency variance is:
A. P3,000 Favorable C. P3,000 Unfavorable
B. P5,400 Favorable D. P5,400 Unfavorable

xlii. The following information is available from the Tyro Company:

Actual factory overhead P15,000
Fixed overhead expenses, actual P 7,200
 Fixed overhead expenses, budgeted P 7,000
Actual hours 3,500
Standard hours 3,800
Variable overhead rate per DLH P 2.50
Assuming that Tyro uses a three-way analysis of overhead variances, what is the spending variance?
A. P 750 F C. P 950 F
B. P 750 U D. P1,500 U

xliii. The Sacto Co.’s standard fixed overhead cost is P3 per direct labor hour based on budgeted fixed costs of
P300,000. The standard allows 2 direct labor hours per unit. During 2006, Sacto produced 55,000 units of
product, incurred P315,000 of fixed overhead costs, and recorded P106,000 actual hours of direct labor. What
are the fixed overhead variances?
Spending variance Volume variance
A. P15,000 U P30,000 F
B. P33,000 U P30,000 F
C. P15,000 U P18,000 F
D. P33,000 U P18,000 F

xliv. Using the information in the preceding number, the amounts of controllable variances for variable overhead are:
Spending Efficiency
A. P20,000 Fav P20,000 Unf
B. P20,000 Unf P20,000 Fav
C. P 5,000 Unf P20,000 Unf
D. P20,000 Fav P 5,000 Unf

Four-way overhead variance

xlv. Safin Corporation’s master budget calls for the production of 5,000 units of product monthly. The annual master

budget includes indirect labor of P144,000 annually. Safin considers indirect labor to be a variable cost. During
the month of April, 4,500 units of product were produced, and indirect labor costs of P10,100 were incurred. A
performance report utilizing flexible budgeting would report a budget variance for indirect labor of:
A. P1,900 Unfavorable. C. P1,900 Favorable.
B. P 700 Unfavorable. D. P 700 Favorable.

xlvi. Wala Company applies overhead on a direct labor hour basis. Each unit of product requires 5 direct labor hours.
Overhead is applied on a 30 percent variable and 70 percent fixed basis; the overhead application rate is P16
per hour. Standards are based on a normal monthly capacity of 5,000 direct labor hours.
During September 2006, Wala produced 1,010 units of product and incurred 4,900 direct labor hours. Actual
overhead cost for the month was P80,000.
What is total annual budgeted fixed overhead cost?
A. P 56,000 C. P672,000
B. P 56,560 D. P678,720

xlvii. Budgeted variable overhead for the level of production achieved is 40,000 machine-hours at a budgeted cost of
P62,000. Actual variable overhead at the level of production achieved was 38,000 hours at an actual cost of
P62,400. What is the total variable overhead variance?
A. P400 favorable C. P3,100 unfavorable
B. P400 unfavorable D. P3,100 favorable

xlviii. The Pinatubo Company makes and sells a single product and uses standard costing. During January, the
company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units of product. The standard cost
card for one unit of product includes the following:
 Variable factory overhead: 3.0 DLHs @ P4.00 per DLH
Fixed factory overhead: 3.0 DLHs @ P3.50 per DLH
For January, the company incurred P22,000 of actual fixed overhead costs and recorded a P875 favorable
volume variance.
The budgeted fixed overhead cost for January is:
A. P31,500 C. P30,625
B. P32,375 D. P33,250

xlix. The variable-overhead spending variance is P1,080, unfavorable. Variable overhead budgeted at 40,000
machine hours is P50,000. Actual machine hours were 36,000. What was the actual variable-overhead rate per
machine hour?
A. P1.28 C. P1.39
B. P1.25 D. P1.52

l. Calvin Klein Company has a standard fixed cost of P6 per unit. At an actual production of 8,000 units a
favorable volume variance of P12,000 resulted. What were total budgeted fixed costs?
A. P36,000. C. P48,000.
B. P60,000. D. P75,000.

li. Puma Company had an 25,000 unfavorable volume variance, a P18,000 unfavorable variable overhead
spending variance, and P2,000 total under applied overhead. The fixed overhead budget variance is
A. P41,000 favorable C. P45,000 favorable
B. P41,000 Unfavorable D. P45,000 Unfavorable

lii. Arlene had an P18,000 unfavorable volume variance, a P25,000 unfavorable variable overhead spending
variance, and P2,000 total under applied overhead. The fixed overhead budget variance is:
A. P41,000 favorable C. P45,000 favorable
B. P41,000 Unfavorable D. P45,000 Unfavorable

liii. 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. P504,000 D. P496,000

liv. CTV Company has a standard fixed cost of P6 per unit. At an actual production of 8,000 units a favorable
volume variance of P12,000 resulted. What were total budgeted fixed costs?
A. P36,000 C. P48,000
B. P60,000 D. P75,000

lv. Richard Company employs a standard absorption system for product costing. The standard cost of its product is
as follows:
Raw materials P14.50
Direct labor (2 DLH x P8) 16.00
Manufacturing overhead (2 DLH 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 P 3,600,000
Fixed 3,000,000
P 6,600,000
 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 P260,000 fixed and P315,000 variable.
The total manufacturing overhead applied during November was P572,000.
The fixed manufacturing overhead volume variance for November is:
A. P10,000 favorable C. P10,000 unfavorable
B. P3,000 unfavorable D. P22,000 favorable

lvi. Using the information for Richard Company in the preceding number, the total variance related to efficiency of
the manufacturing operation for November is:
A. P 9,000 unfavorable C. P12,000 unfavorable
B. P21,000 unfavorable D. P11,000 unfavorable

Question Nos. 65 and 66 are based on the following:

Tiny Bubbles Company had the following activity relating to its fixed and variable overhead for the month of July.
Actual costs
Fixed overhead P120,000
Variable overhead 80,000

Flexible budget
(Standard input allowed for actual output achieved x the budgeted rate)
Variable overhead P 90,000

Applied
(Standard input allowed for actual output achieved x the budgeted rate)
Fixed overhead P125,000
Variable overhead spending variance 1,200 F
Production volume variance 5,000 U

lvii. If the budgeted rate for applying variable manufacturing overhead was P20 per direct labor hour, how efficient or
inefficient was Tiny Bubbles in terms of using direct labor hours as an activity base?
A. 100 direct labor hours inefficient C. 100 direct labor hours efficient
B. 440 direct labor hours inefficient D. 440 direct labor hours efficient

lviii. The fixed overhead efficiency variance is:

A. P 3,000 favorable C. P 3,000 unfavorable
B. P10,000 unfavorable D. Never a meaningful variance

Questions 67 and 68 are based on a monthly normal volume of 50,000 units (100,000 direct labor hours). Raff
Co.’s standard cost system contains the following overhead costs:
Variable P6 per unit
Fixed P8 per unit

The following information pertains to the month of March:

Units actually produced 38,000
Actual direct labor hours worked 80,000
Actual overhead incurred:
Variable P250,000
Fixed 384,000

lix. For March, the unfavorable variable overhead spending variance was:
A. P6,000 C. P12,000
 B. P10,000 D. P22,000

lx. For March, the fixed overhead volume variance was:

A. P96,000U C. P80,000U
B. P96,000F D. P80,000F

lxi. Edney Company employs standard absorption system for product costing. The standard cost of its product is as
follows:
Raw materials P14.50
Direct labor (2 DLH x P8) 16.00
Manufacturing overhead (2 DLH x P11) 22.00
The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Edney
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
During November, Edney produced 26,000 units. Edney used 53,500 direct labor hours in November at a cost
of P433,350. Actual manufacturing overhead for the month was P260,000 fixed and P315,000 variable. The
total manufacturing overhead applied during November was P572,000.
The variable manufacturing overhead variances for November are:
Spending Efficiency
A. P9,000 unfavorable P3,000 unfavorable
B. P6,000 favorable P9,000 unfavorable
C. P4,000 unfavorable P1,000 favorable
D. P9,000 favorable P12,000 unfavorable

lxii. The fixed manufacturing overhead variances for November are:

Spending Volume
A. P10,000 favorable P10,000 favorable
B. P10,000 unfavorable P10,000 favorable
C. P 6,000 favorable P 3,000 unfavorable
D. P 4,000 unfavorable P22,000 favorable

.
i
Answer: A
Unit cost of materials: (Debit to Goods in Process + Debit to Materials Quantity Variance - Credit to Materials
Price Variance)/Number of Units Completed
Total debits to work in process account P51,690
Debit to materials quantity variance 1,970
Credit to materials price variance ( 3,740)
Actual materials cost P49,920
Per unit cost: P49,920/96,000 P0.52
ii
. Answer: A
Actual quantity used 1,066
Add favorable quantity (209/5.5) 38
Standard quantity allowed 1,104
iii
. 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
iv
. 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
v
. Answer: A
AQ @ SP (3,150 x 40) P126,000
SQ @ SP (600 x 5 x 40) 120,000
Unfavorable Quantity Variance P 6,000
vi
. 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
vii
. 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
viii
. 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
ix
. Answer: C
MPV = 1,400(1.10 – 1.00)
= 140
x
. Answer: A
MUV = (AQ – SQ)SP
= (2,300 – 2,100) 6.25
= 1,250 Unfavorable
xi
. Answer: C
Actual materials cost 26,400
 AQ @ SP (22,000 x 1.25) 27,500
Favorable Price Variance ( 1,100)
xii
. 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
xiii
. 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
xiv
. 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
xv
. Answer: A
Labor AH Std. Mix at AH Diff SR Labor Mix Variance
M 4,500 5,000 (500) P10 P (5,000)
F 3,000 2,500 500 5 2,500
7,500 7,500 - P (2,500)Fav

xvi
. 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
xvii
. Answer: C
Direct labor cost at standard rate 7,150 – 750 6,400
Standard rate 6,400/800 8.00
xviii
. 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
xix
. 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
xx
. Answer: C
LEV: (410 x 20) – 8,440 = (240)F
xxi
. 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
xxii
. Answer: B
SR = LEV ÷ (AH – SH)
= -4,000 ÷ (29,000 – 30,000)
= P4.00
xxiii
. Answer: C
AR = SR – (LRV ÷ AH)
AR = P4.00 – (5,800 ÷ 29,000)
= P3.80
xxiv
. 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

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

xxvii. Answer: D
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

xxviii. 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.

xxix. 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

xxx. 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)

xxxi. 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

xxxii. Answer: D
Actual overhead 230,000
Less Budgeted OH at standard hours
Variable 32,000 x 5 160,000
Fixed 64,000 (224,000)
Unfavorable budget variance 6,000

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

xxxv. Answer: D
Actual overhead 230,000
Budget at standard hours:
Fixed OH 64,000
Variable OH (32,000 x 5) 160,000 224,000
Unfavorable controllable variance 6,000

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

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

xxxviii.Answer: D
Efficiency Variance = (31,500 – 30,000) 10 15,000 Unfavorable
Standard hours: 20,000 units x 1.5 hours

xxxix. Answer: A
Fixed overhead rate per hour 8.50 – 6.00 2.50
Denominator hours (previous number) 40,000/2.5 16,000

xl. 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

xli. Answer: C
EV = (AH – SH) SVOHR (14,000 – 13,500) 6 3,000U
SH (4,500 x 3) 13,500

xlii. 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)

xliii. 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
xliv. 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

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

xlvi. Answer: C
Fixed overhead per hour: 16 x 0.7 11.20
Annual fixed OH budget 5,000 x 12 x 11.20 672,000

xlvii. Answer: B
Actual variable overhead 62,400
Variable OH applied 62,000
Unfavorable variable OH variance 400

xlviii. Answer: C
Applied fixed overhead (3,000 x 3 x 3.50) 31,500
Less: Favorable volume variance 875
Budgeted fixed overhead 30,625

xlix. Answer: A
Standard rate: 50,000/40,000 1.25
Excess rate 1,080/3,600 0.03
Actual rate 1.28

l. Answer: A
Applied fixed overhead 48,000
Less favorable volume variance 12,000
Budgeted fixed overhead 36,000

li. Answer: A
Unfavorable volume variance 25,000
Unfavorable VOH spending variance 18,000
Total 43,000
Net Unfavorable variance 2,000
Favorable fixed OH budget variance 41,000

lii. 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
liii. Answer: C
Budgeted fixed OH 500,000
Add: Favorable volume variance 12,000
Applied fixed overhead 512,000

liv. Answer: A
Applied FOH (8,000 x 6) 48,000
Less: Favorable volume variance 12,000
Budgeted FOH 36,000

lv. 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

lvi. Answer: B
Labor Efficiency: (53,500 – 52,000) 8 12,000
Variable OH Efficiency (53,500 – 52,000) 6 9,000
Total efficiency variance 21,000

lvii. 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

lviii. Answer: D
Fixed overhead volume variance is a more meaningful variance in evaluating the use of the capacity.

lix. 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

lx. Answer: A
(38,000 units – 50,000 units) x P8 P96,000

lxi. Answer: B
Spending [P315,000 – (53,500 x P6)] P(6,000)
Efficiency [(53,500 – 52,000) x P6] P 9,000

lxii. Answer: B
Spending [P260,000 – (P3M ÷ 12)] P10,000U
Volume [(26,000 – 25,000) x P10] P10,000F