COST ACCOUNTING AND CONTROL QUIZ NO.

Activity-Based Costing and Management

Please prepare your answers for these questions before taking the google form quiz.

For items 1-10, use the following information:

Wonders Inc. manufactures radios in two different styles:

Radio Model Annual Sales in Units

Starry 10,000
Polka 16,000

Wonders uses a traditional volume-based costing system in applying factory overhead using direct
labor pesos. The unit prime costs of each product were as follows:

Starry Polka
Direct materials P38.00 P25.40
Direct labor:
1.2 x P14.60 17.52
0.9 x P14.60 13.14

The predetermined overhead rate was 350% (P1,349,040/385,440).

Direct labor budget per annual sales:

Starry radio 10,000 x P17.52 P175,200
Polka radio 16,000 x P13.14 210,240
Total P385,440

Factory overhead:
Engineering and Design P 404,712
Quality Control 269,808
Machinery 539,616
Miscellaneous Overhead 134,904
Total P1,349,040

Wonders’ controller had been researching activity-based costing and decided to switch to it. A
special study determined Wonders’ two radio models were responsible for the following
proportions of each cost driver:

Starry Polka
Engineering and Design 40% 60%
Quality Control 45% 55%
Machinery 60% 40%
Miscellaneous Overhead 35% 65%
Q1-Using traditional costing, applied factory overhead per unit for the Starry model is calculated to
be:
Q2-Using traditional costing, applied factory overhead per unit for the Polka model is calculated to
be:
Q3- Using activity-based costing, applied factory overhead per unit for the Starry model, based on
Engineering and Design, is calculated to be:
Q4-Using activity-based costing, applied factory overhead per unit for the Starry model, based on
Quality Control, is calculated to be:
Q5-Using activity-based costing, applied factory overhead per unit for the Starry model, based on
Machinery, is calculated to be:
Q6-Using activity-based costing, applied factory overhead per unit for the Starry model, based on
Miscellaneous Overhead, is calculated to be:
Q7-Using activity-based costing, applied factory overhead per unit for the Polka model, based on
Engineering and Design, is calculated to be:
Q8-Using activity-based, applied factory overhead per unit for the Polka model, based on Quality
Control, is calculated to be:
Q9-Using activity-based costing, applied factory overhead per unit for the Polka model, based on
Machinery, is calculated to be:
Q10-Using activity-based costing, applied factory overhead per unit for the Starry model, based on
Miscellaneous Overhead, is calculated to be:

Items 11 through 14 are based on the following information:

Shine Co. manufactures laser printers. It has outlined the following overhead cost drivers.

Budgeted Level for Budgeted Overhead

Overhead Cost Pool Cost Driver Overhead cost
Cost Driver Rate
Quality Control Inspections P64,800 1,080 P60
Machine repetitions Repetitions 132,000 1,100 120
Accounts Receivable Invoices 900 30 30
Other overhead costs Direct labor hours 48,000 4,000 12

Shine Co. had an order for 700 laser printers. Following is a list of production requirements for the
order:
Number of inspections 175
Number of repetitions 180
Number of invoices processed 5
Direct labor hours 650

Q11-Using activity-based costing, applied factory overhead for the 700 laser printer order based on
the number of inspections is calculated to be:
Q12-Using activity-based costing, applied factory overhead for the 700 laser printer order based on
the number of repetitions is calculated to be:
Q13-Using activity-based costing, applied factory overhead for the 700 laser printer order based on
the number of invoices is calculated to be:
Q14-Using activity-based costing, applied factory overhead for the 700 laser printer order based on
direct labor hours is calculated to be:
Items 15 through 20 are based on the following information

Sparky co. manufactures a variety of electric razors used by both men and women for hair removal.
The company’s plant is partially automated; however, some manual labor is employed. The
company uses the activity-based cost system. Listed below is cost driver information used in the
product-costing system:

Budgeted Budgeted Cost Driver

Overhead Cost Pool Cost Driver Overhead Rate
Overhead Cost Level
Machinery depreciation/
P168,640 27,200 Machine hours P6.20
maintenance
Factory depreciation/
129,250 27,500 Machine hours 4.70
utilities/ insurance
Product design 554,400 38,500 Hours in design 14.40
Material purchasing/
1,078,000 134,750 Raw materials 8.00
storing

Two current product orders had the following requirements:

Men’s Razor Women’s Razor

Units produce and sold 20,000 26,000
Direct labor hours 30 40
Pounds of raw materials 860 750
Hours in design 20 23
Machine hours 65 50

Q15-Utilizing ABC, how much overhead is assigned to the order for men’s razors based on machine
hours?
Q16-Utilizing ABC, how much overhead is assigned to the order for women’s razors based on
machine hours?
Q17-Utilizing ABC, how much overhead is assigned to the order for men’s razors based on hours in
design?
Q18-Utilizing ABC, how much overhead is assigned to the order for women’s razors based on hours
in design?
Q19-Utiliizing ABC, how much overhead is assigned to the order for men’s razors based on pounds
of raw materials?
Q20-Utilizing ABC, how much overhead is assigned to the order for women’s razors based on
pounds of raw materials?

For 21-26, the choices are the following:

 Unit-level activities
 Batch-level activities
 Product-level activities
 Facility-level activities

Q21- Which of the following levels of costs should not be included in product costs for internal
management reports that are used for decision making?
Q22- Machining a part for a product is an example of a:
Q23- Production order processing is an example of a:
Q24- The power costs associated with running machines is an example of a cost that can be traced
to a:
Q25- Labor setup cost is an example of a cost that can be traced to a:
Q26- The plant manager’s salary is an example of a cost that would be traced to a:

The remaining questions are independent cases.

Q27-Lilium Company uses activity-based costing to determine unit product costs for external
reports. The company has two products: A and B. The annual production and sales of Product A is
10,000 units and of Product B is 4,000 units. There are three overhead activity centers, with
estimated overhead costs and expected activity as follows:

Estimated Expected Activity

Activity Center
Overhead Costs Total Product A Product B
Activity 1 P25,000 250 150 100
Activity 2 P65,000 1,000 800 200
Activity 3 P90,000 3,000 1,000 2,000

The overhead cost per unit of Product A under activity-based costing is closest to:

Q28-Tiger Lily company uses activity-based costing to determine unit product costs for external
reports. The company has two products: A and B. The annual production and sales of Product A is
4,000 units and of Product B is 1,000 units. There are three overhead activity centers, with
estimated overhead costs and expected activity as follows:

Estimated Expected Activity

Activity Center
Overhead Costs Total Product A Product B
Activity 1 P18,000 1,000 700 300
Activity 2 P24,000 600 500 100
Activity 3 P60,000 1,200 800 400

The overhead cost per unit of Product A under activity-based costing is closest to:

Q29- Santan Company has two products: A and B. The company uses activity-based costing to
determine product costs. The estimated overhead costs and expected activity for each of the
company’s three overhead activity centers are as follows:

Estimated Expected Activity

Activity Center
Overhead Costs Total Product A Product B
Activity 1 P18,000 500 300 200
Activity 2 P16,000 600 500 100
Activity 3 P27,000 900 600 300

The predetermined overhead rate under the activity based costing system for Activity 3 is closest
to:
Q30- Carnation Company has two products: A and B. The company uses activity-based costing to
determine product costs. The estimated overhead costs and expected activity for each of the
company’s three overhead activity centers are as follows:

Estimated Expected Activity

Activity Center
Overhead Costs Total Product A Product B
Activity 1 P32,600 1,00 700 300
Activity 2 P17,600 800 600 200
Activity 3 P52,500 500 400 100

The predetermined overhead rate under the activity based costing system for Activity 3 is closest
to:
Standard Costing and Variance Analysis

Q1 – Which of the following is true concerning standard costs?

a. Standard costs are estimates of costs attainable only under the most ideal conditions but
rarely practicable.
b. Standard costs are difficult to use with a process costing system.
c. If probably used, standard can help motivate employees.
d. Unfavorable variance, material in amount, should be investigated but large favorable
variance need not be investigated.

Q2 – Which of the following terms is best identified with a system of standard costs?
a. Marginal costing
b. Contribution approach.
c. Management by exception
d. Standardized accounting system.

Q3 – Which of the following is standard cost nearly like?

a. Estimate cost
b. Budgeted cost
c. Product cost
d. Period cost

Q4 – Which of the following best characterizes a standard cost system?

a. Standard costs involve cost control which, in turn, mean cost reduction.
b. Standards can pinpoint responsibility and can help motivate employees.
c. All variances from standard should be reviewed.
d. Al significant unfavorable variances should be reviewed, but significant favorable variances
need not be reviewed.

Q5 – Standard costing will produce the same results as actual or conventional costing when
standard cost variances are distributed to:
a. Cost of goods sold and inventories.
b. A statement of financial position account.
c. An income and expense account.
d. None of the above.

Q6 – When performing input-output analysis in standard costing, “standard hours allowed” is a

means of measuring
a. Standard output at standard hours.
b. Actual output at standard hours.
c. Standard output at actual hours
d. Actual output at actual hours.

Q7 – The operating capacity that is required to satisfy anticipated sales demand is

a. Normal capacity
b. Ideal capacity
c. Practical capacity
d. Theoretical capacity
Q8 – If the actual amount of direct materials used in a process exceeded the standard amount of
materials, there was:
a. An unfavorable materials price variance.
b. A favorable materials price variance
c. An unfavorable materials quantity variance.
d. A favorable materials quantity variance.

Q9 – When computing variances from standard costs, the difference between actual and standard
price multiplied by actual quantity yields a:
a. Combined price-quantity variance.
b. Price variance
c. Volume variance
d. Mix variance.

Q10 – In a standard cost system, the materials price variance is obtained by multiplying the
a. Actual price by the difference between actual quantity purchased and standard quantity
used.
b. Actual quantity purchased by the difference between actual price and standard price.
c. Standard price by the difference between standard quantity purchased and standard
quantity used.
d. Standard quantity purchased by the difference between actual price and standard price.

Q11 – Suppose a standard cost system is being used. What do you call the variations in the use of
materials which can be calculated by comparing the record of materials withdrawn with the
standard consumption?
a. Volume variance
b. Quantity variance
c. Efficiency variance
d. Price variance

Q12 – What type of direct materials variances for price and usage will arise if the actual number of
pounds of materials used exceeds standard pounds allowed but actual cost was less than standard
cost? (Usage; Price)
a. Unfavorable; favorable
b. Favorable; favorable
c. Favorable; unfavorable
d. Unfavorable; unfavorable

Q13 – How should a usage variance that is significant in amount be treated at the end of an
accounting period?
a. Reported as a deferred charge or credit.
b. Allocated among work-in-process inventory, finished goods inventory and cost of goods
sold.
c. When material is purchased.
d. When purchase order is originated.

Q14 – If a company follows a practice of isolating variances at the earliest point in time, what
would be the appropriate time to isolate and recognize a direct material price variance?
a. When material is issued.
b. When material is used in production.
 c. When material is purchased.
d. When purchase order is originated.

Q15 – An unfavorable price variance occurs because of

a. Price increases on raw materials.
b. Price decreases on raw materials.
c. Less than anticipated levels of waste in the manufacturing process.
d. More than anticipated levels of waste in the manufacturing process.

Q16 – Which department is customarily held responsible for an unfavorable materials usage
variance?
a. Quality control
b. Purchasing
c. Engineering
d. Production

Q17 – The standard unit cost is used in the calculation of which of the following variance? (Material
price variance; Materials usage variance)
a. No; No
b. No; Yes
c. Yes; No
d. Yes; Yes

Q18 – The formula for labor rate variance is

a. Actual hours worked x actual hourly rate less standard hourly rate.
b. Actual hours worked x standard hourly rate less actual hourly rate.
c. Standard hourly rate x standard labor hours less actual hours worked.
d. Standard hourly rate x difference in hours.

Q19 – Excess direct labor wages variances resulting from overtime premium will be disclosed in
which type of variance?
a. Yield
b. Quantity
c. Labor efficiency
d. Labor rate

Q20 -How is labor rate variance computed?

a. The difference between standard and actual rate multiplied by standard hours.
b. The difference between standard and actual rate multiplied by actual hours.
c. The difference between standard and actual hours multiplied by actual hours.
d. The difference between standard and actual hours multiplied by the difference between
standard and actual rate.

Q21 – Troopers company had budgeted 50,000 units of output using 50,000 units of raw materials
at a total material cost of P100,000. Actual output was 50,000 units of product requiring 45,000
units of raw materials at a cost of P2.10 per unit. The direct materials price variance and usage
variance were: (Price; Usage)

Q22 – Natt company uses a standard cost system. Information for raw materials for Product E for
the month of October is as follows:
 Standard unit price P1.60
Actual purchase price per unit 1.55
Actual quantity purchased 2,000 units
Actual quantity used 1,900 units
Standard quantity allowed for actual production 1,800 units

What is the materials purchase price variance?

Q23 – Information on Benning Company’s direct material cost is as follows:

Actual unis of direct materials used P20,000

Actual direct material cost P40,000
Standard price per unit of direct materials P2.10
Direct materials efficiency variance – favorable P3,000

What was Benning’s direct material price variance?

Q24 – Information on Bisset Company’s direct material cost is as follows:

Standard unit price P3.60

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

What was the actual purchase price per unit, rounded to the nearest centavo?

Q25 – Holmes Company manufactures tables with vinyl tops. The standard material cost for the
vinyl used per Type-K table is P7.80 based on six square feet of vinyl at a cost of P1.30 per square
foot. A production run of 1,000 tables in January 2018 resulted in usage of 6,400 square feet of vinyl
at a cost of P1.20 per square foot, a total cost of P7,680. The usage variance resulting from the
above production run was

Q26 – Fowler Corp. uses a standard cost system. Direct labor information for product JRE for the
month of October is as follows:

Standard rate P6.00 per hour

Actual rate paid P6.10 per hour
Standard hours allowed for actual production 1,500 hours
Labor efficiency variance P600 unfavorable

What are the actual hours worked?

Q27 – The Sta. Ana Company has a budgeted normal monthly capacity of 5,000 labor hours with a
standard production of 4,000 units at this capacity. Standard costs are:

Materials - 2 kilos at P1.00

Labor - P8.00 per hour
 Factory overhead at normal capacity
Fixed expenses - P5,000.00
Variable expenses - P1.50 per labor hour

During September, actual factory overhead totaled P11,250, and 4,500 labor hours cost P33,750.
Production during the month was 3,500 units using 7,200 kilos of materials at a cost of P1.02 per
kilo.

The materials price variance during September was:

Q28 - Refer to Question 27, the labor efficiency variance was:

Q29 – Leia Company’s direct-labor costs for the month of January 2018 were as follows:

Actual direct-labor hours 20,000

Standard direct-labor hours 21,000
Direct-labor rate variance – unfavorable P3,000
Total Payroll P126,000

What was Leia’s direct-labor efficiency variance?

Q30 – A Scott Corporation’s direct-labor costs for the month of March 2018 were as follows:

Standard direct-labor hours 42,000

Actual direct-labor hours 40,000
Direct-labor rate variance – favorable P8,400
Standard direct-labor rate per hour P6.30

What was A. Scott’s total direct-labor payroll for the month of March 2018?

Q31 – During March 2018, W. Thatcher Company’s direct material costs for the manufacture of
product NH 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

W. Thatcher’s usage variance for March 2018 was

Q32 – M. Carpenter Company manufactures desks with vinyl tops. The standard material cost for
the vinyl used per Model I desk is P27.00 based on twelve square feet of vinyl at a cost of P2.25 per
square foot. A production run of 1,000 desks in march 2019 resulted in usage of 12,600 square feet
of vinyl at a cost of P2.00 per square foot, a total cost of P25,200. The usage variance resulting from
the above production run was

Q33 – The following information relates to a department of I. Graham Company for the fourth
quarter 2018:

Actual total overhead (fixed plus variable) P178,500

 Budget formula P110,000 plus P0.50 per hour
Total overhead application rate P1.50 per hour
Spending variance P8,000 unfavorable
Volume variance P5,000 favorable

The total overhead variance is divided into three variances: spending, efficiency and volume.

What were the actual hours worked in this department during the quarter?

Q34 – Refer to Q33. What were the standard hours allowed for good output in this department
during the quarter?

Q35 – Refer to Q33. Each unit takes five hours to manufacture, and the selling price is P4.50 per
unit. Based on the overhead budget formula, how many units must be sold to generate P30,000
more than total budgeted overhead costs?

Q36 – Data on McBeal Company’s direct-labor cost 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 McBeal’s actual direct-labor rate?