P01 - Standard Costs and Variance Analysis

MANAGEMENT ADVISORY SERVICES NORMAL COSTING One-Way Variance Actual Overhead 25. Hayward applies overhead at $5 per machine hour. During March it worked 10,000 hours and overapplied overhead by $3,000. Actual overhead was (E) a. $53,000. c. $47,000. b. $50,000. d. none of the above. L & H 10e Budgeted Overhead 17. Machine hours used to set the predetermined overhead rate were 50,000, actual hours were 48,000, and overhead applied was $120,000. Budgeted overhead for the year was a. $115,200 c. $120,000 b. $118,000 d. $125,000 D, L & H 9e 42. Machine hours used to set the predetermined overhead rate were 80,000, actual hours were 90,000, and overhead applied was $117,000. Budgeted overhead for the year was a. $104,000 c. $131,625 b. $117,000 d. Some other number. D, L & H 9e Applied Overhead 48. Machine hours used to set the predetermined overhead rate were 68,000, actual hours were 64,000, and budgeted overhead was $142,800. Overhead applied for the year was (E) a. $134,400 c. $142,800 b. $136,500 d. $151,725 D, L & H 9e 36. Gonzalez Company uses the equation $520,000 + $2 per direct labor hour to budget manufacturing overhead. Gonzalez has budgeted 150,000 direct labor hours for the year. Actual results were 150,000 direct labor hours and $817,500 total manufacturing overhead. The total overhead applied for the year is (E) a. $300,000. c. $817,500. b. $520,000. d. $820,000. L & H 10e CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 37. Gonzales Company uses the equation $540,000 + $2 per direct labor hour to budget manufacturing overhead. Gonzalez has budgeted 160,000 direct labor hours for the year. Actual results were 160,000 direct labor hours and $857,500 total manufacturing overhead. The total overhead variance for the year is (E) a. $2,500 favorable. c. $2,500 unfavorable. b. $12,500 favorable. d. Some other number. D, L & H 9e Over-Applied 24. Palo applies overhead based on direct labor cost. It had budgeted manufacturing overhead of $500,000 and budgeted direct labor of $250,000. Actual overhead was $525,000, actual labor cost was $270,000. Overhead was (E) a. Over-applied by $15,000. c. Over-applied by $25,000. b. Over-applied by $20,000. d. Under-applied by $20,000. D, L & H 9e 1

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Watson Company uses a predetermined factory overhead application rate based on direct labor cost. Watson's budgeted factory overhead was $756,000 based on a budgeted volume of 60,000 direct labor hours, at a standard direct labor rate of $7.20 per hour. Actual factory overhead amounted to $775,000 with actual direct labor cost of $450,000 for the year ended December 31. How much was Watson's overapplied factory overhead? (M) A. $12,500 C. $19,000 B. $18,000 D. $37,000 Gleim

2

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Nil Co. uses a predetermined factory O/H application rate based on direct labor cost. For the year ended December 31, Nil’s budgeted factory O/H was $600,000, based on a budgeted volume of 50,000 direct labor hours, at a standard direct labor rate of $6 per hour. Actual factory O/H amounted to $620,000, with actual direct labor cost of $325,000. For the year, overapplied factory O/H was (M) a. $20,000 c. $30,000 b. $25,000 d. $50,000 AICPA 1186 II-29

Page 1 of 171

MANAGEMENT ADVISORY SERVICES 30. Nil Co. uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. For the year ended December 31, Nil's estimated manufacturing overhead was $600,000, based on an estimated volume of 50,000 direct labor hours, at a direct labor rate of $6.00 per hour. Actual manufacturing overhead amounted to $620,000, with actual direct labor cost of $325,000. For the year, manufacturing overhead was: (M) A. overapplied by $20,000. C. overapplied by $30,000. B. underapplied by $22,000. D. underapplied by $30,000. G & N 10e 24. Spooner applies overhead based on direct labor cost. It had budgeted manufacturing overhead of $50,000 and budgeted direct labor of $25,000. Actual overhead was $52,500, actual labor cost was $27,000. Overhead was (E) a. overapplied by $1,500. c. overapplied by $2,500. b. overapplied by $2,000. d. underapplied by $2,000.L & H 10e 44. Antaya Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Antaya has budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $388,000 fixed overhead, and $98,600 variable overhead. The total overhead variance for the year is (E) a. $14,400 c. $37,200 b. $15,600 d. $30,000. L & H 10e 44. Hughes Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Hughes had budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $397,000 fixed overhead, and $94,500 variable overhead. The total overhead variance for the year is (E) a. $2,700 c. $22,000 b. $10,700 d. $30,000 D, L & H 9e 38. Alcatraz Company uses the equation $400,000 + $1.75 per direct labor hour to budget manufacturing overhead. Alcatraz has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS hours, $397,000 fixed overhead, and $194,500 variable overhead. The total overhead variance for the year is (E) a. $2,000 c. $47,000 b. $3,000 d. $48,000 D, L & H 9e 43. Cooke Company uses the equation $450,000 + $1.50 per direct labor hour to budget manufacturing overhead. Cooke has budgeted 150,000 direct labor hours for the year. Actual results were 156,000 direct labor hours and $697,500 total manufacturing overhead. The total overhead variance for the year is a. $4,500 favorable. c. $4,500 unfavorable. b. $18,000 favorable. d. $18,000 unfavorable. D, L & H 9e 37. Gonzalez Company uses the equation $520,000 + $2 per direct labor hour to budget manufacturing overhead. Gonzalez has budgeted 150,000 direct labor hours for the year. Actual results were 150,000 direct labor hours and $817,500 total manufacturing overhead. The total overhead variance for the year is (E) a. $2,500 favorable. c. $2,500 unfavorable. b. $12,500 favorable. d. some other number. L & H 10e 3

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Pane Company uses a job costing system and applies overhead to products on the basis of direct labor cost. Job No. 75, the only job in process on January 1, had the following costs assigned as of that date: direct materials, $40,000; direct labor, $80,000; and factory overhead, $120,000. The following selected costs were incurred during the year: Traceable to jobs: Direct materials $178,000 Direct labor 345,000 $523,000 Not traceable to jobs: Factory materials and supplies 46,000 Indirect labor 235,000 Plant maintenance 73,000 Depreciation on factory equipment 29,000 Other factory costs 76,000 459,000

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MANAGEMENT ADVISORY SERVICES Pane's profit plan for the year included budgeted direct labor of $320,000 and factory overhead of $448,000. Assuming no work-in-process on December 31, Pane's overhead for the year was A. $11,000 overapplied. C. $11,000 underapplied. B. $24,000 overapplied. D. $24,000 underapplied. CMA Samp Q3-5 Under-Applied 4 . The Kelley Company uses a predetermined overhead rate of $9 per direct labor hour to apply overhead. During the year, 30,000 direct labor hours were worked. Actual overhead costs for the year were $240,000. The overhead variance is (E) a. $27,000 overlapped c. $30,000 underapplied b. $26,670 underapplied d. $24,000 overapplied H&M 38. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead. Bonds has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours, $297,000 fixed overhead, and $194,500 variable overhead. The total overhead variance for the year is (E) a. $1,000. c. $35,000 b. $48,000. d. $36,000. L & H 10e 29. Malcolm Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. On September 1, the estimates for the month were: Manufacturing overhead $17,000 Direct labor hours 13,600 During September, the actual results were: Manufacturing overhead $18,500 Direct labor hours 12,000 The cost records for September will show: (E) G & N 10e A. Overapplied overhead of $1,500. C. Overapplied overhead of $3,500. B. Underapplied overhead of $1,500. D. Underapplied overhead of $3,500.

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Actual Direct Labor Hours 30. Hoyt Company applies overhead at $6 per direct labor hour. In March Hoyt incurred overhead of $144,000. Under-applied overhead was $6,000. How many direct labor hours did TYV work? (E) a. 25,000 c. 23,000 b. 24,000 d. 22,000 D, L & H 9e .

5

MNO Company applies overhead at P5 per direct labor hour. In March 2001, MNO incurred overhead of P120,000. Under-applied overhead was P5,000. How many direct labor hours did MNO work? (E) A. 25,000 C. 24,000 B. 22,000 D. 23,000 RPCPA 1001 .

Margolos, Inc. ends the month with a volume variance of $6,360 unfavorable. If budgeted fixed factory O/H was $480,000, O/H was applied on the basis of 32,000 budgeted machine hours, and budgeted variable factory O/H was $170,000, what were the actual machine hours (AH) for the month? (M) a. 32,424 c. 31,687 b. 32,000 d. 31,576 J.B. Romal

41. Pinnini Co. uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Last year, Pinnini Company incurred $225,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied $14,500 for the year. If the predetermined overhead rate was $5.00 per direct labor hour, how many hours did the company work during the year? (M) A. 45,000 hours C. 42,100 hours B. 47,900 hours D. 44,000 hours G & N 10e 42. Parsons Co. uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Last year Parsons incurred $250,000 in actual manufacturing overhead cost. The Manufacturing Overhead account showed that overhead was overapplied in the amount of $12,000 for the year. If the predetermined overhead rate was $8.00 per direct labor hour, how many hours were worked during the year? (M) Page 3 of 171

MANAGEMENT ADVISORY SERVICES A. 31,250 hours B. 30,250 hours

STANDARD COSTS AND VARIANCE ANALYSIS C. 32,750 hours D. 29,750 hours

G & N 10e

Three-Way Variance Variable Overhead Spending Variance 39. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead. Bonds has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours, $297,000 fixed overhead, and $194,500 variable overhead. The variable overhead spending variance for the year is (E) a. $2,000. c. $47,000. b. $3,000. d. $48,000. L & H 10e 39. Alcatraz Company uses the equation $400,000 + $1.75 per direct labor hour to budget manufacturing overhead. Alcatraz has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours, $397,000 fixed overhead, and $194,500 variable overhead. The variable overhead spending variance for the year is (E) a. $2,000 c. $47,000 b. $3,000 d. $48,000 D, L & H 9e 45 Antaya Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Antaya has budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $388,000 fixed overhead, and $98,600 variable overhead. The variable overhead spending variance for the year is (E) a. $1,400 c. $37,200. b. $8,600 d. $15,600. L & H 10e 45. Hughes Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Hughes had budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $397,000 fixed overhead, and $94,500 variable overhead. The variable overhead spending variance for the year is (E) a. $2,700 c. $22,000 b. $10,700 d. $30,000 D, L & H 9e CMA EXAMINATION QUESTIONS

29. Baxter Corporation's master budget calls for the production of 5,000 units of its product monthly. The master budget includes indirect labor of $144,000 annually; Baxter 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 $10,100 were incurred. A performance report utilizing flexible budgeting would report a spending variance for indirect labor of: (M) A. $1,900 unfavorable. C. $1,900 favorable. B. $700 favorable. D. $700 unfavorable. G & N 10e Volume Variance . ABC Company uses the equation P300,000 + P1.75 per direct labor hour to budget manufacturing overhead. ABC has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours, P297,000 fixed overhead, and P194,500 variable overhead. What is the fixed overhead volume variance for the year? (E) A. P35,000 unfavorable. C. P2,000 favorable. B. P36,000 unfavorable. D. P3,000 favorable. RPCPA 1001 41. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead. Bonds has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours, $297,000 fixed overhead, and $194,500 variable overhead. The fixed overhead volume variance for the year is (E) a. $39,000. c. $33,000. b. $3,000. d. $36,000. L & H 10e 47. Antaya Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Antaya has budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $388,000 fixed overhead, and $98,600 variable overhead. The fixed overhead volume variance for the year is (E) a. $1,400. c. $15,600. b. $13,000. d. $30,000. L & H 10e 47. Hughes Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Hughes had budgeted 75,000 Page 4 of 171

MANAGEMENT ADVISORY SERVICES direct labor hours for the year. Actual results were 81,000 direct labor hours, $397,000 fixed overhead, and $94,500 variable overhead. The fixed overhead volume variance for the year is (E) a. $1,400 c. $15,600 b. $13,000 d. $30,000 D, L & H 9e 41. Alcatraz Company uses the equation $400,000 + $1.75 per direct labor hour to budget manufacturing overhead. Alcatraz has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours, $397,000 fixed overhead, and $194,500 variable overhead. The fixed overhead volume variance for the year is (E) a. $2,000 c. $47,000 b. $3,000 d. $48,000 D, L & H 9e Fixed OH Budget Variance, Volume Variance & Variable OH Spending Variance Over-(Under) Applied Overhead 34. Waldorf had a $10,000 unfavorable fixed overhead budget variance, a $6,000 unfavorable variable overhead spending variance, and a $2,000 favorable volume variance. The total overhead was (E) a. $14,000 overapplied. c. $18,000 overapplied. b. $14,000 underapplied. d. $18,000 underapplied. L & H 10e Variable Overhead Spending Variance 35. Bacon had a $18,000 unfavorable volume variance, a $5,000 unfavorable fixed overhead budget variance, and $12,000 total under-applied overhead. The variable overhead spending variance was (E) a. $11,000 favorable. c. $11,000 unfavorable. b. $1,000 favorable. d. $23,000 unfavorable. D, L & H 9e Fixed Overhead Budget Variance 32. Daly had a $9,000 favorable volume variance, a $7,500 unfavorable variable overhead spending variance, and $6,000 total overapplied overhead. The fixed overhead budget variance was (E) a. $4,500 favorable. c. $4,500 unfavorable. b. $8,000 favorable. d. $8,000 unfavorable. L & H 10e CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 141. ABC had a P28,000 favorable volume variance, a P25,000 unfavorable variable overhead spending variance, and P12,000 total overapplied overhead. The fixed overhead budget variance was (E) a. P9,000 favorable. c. P9,000 unfavorable. b. P26,000 favorable. d. P26,000 unfavorable. Pol Bobadilla 49. Rhoda had a $2,000 favorable volume variance, a $7,000 unfavorable variable overhead spending variance, and $3,000 total underapplied overhead. The fixed overhead budget variance was (E) a. $2,000 favorable. c. $2,000 unfavorable. b. $8,000 favorable. d. $8,000 unfavorable. L & H 10e 16. XYZ had an $8,000 unfavorable volume variance, a $11,500 unfavorable variable overhead spending variance, and $1,500 total underapplied overhead. The fixed overhead budget variance was (E) a. $18,000 favorable. c. $17,500 unfavorable. b. $21,000 favorable. d. $21,000 unfavorable. L & H 10e Volume Variance 50. Katrina Inc. had a $30,000 favorable fixed overhead budget variance, a $44,000 unfavorable variable overhead spending variance, and $44,000 total underapplied overhead. The volume variance was (E) a. $30,000 overapplied. c. $58,000 overapplied. b. $30,000 underapplied. d. $58,000 underapplied. L & H 10e 33. Acme had a $6,000 favorable fixed overhead budget variance, a $2,500 unfavorable variable overhead spending variance, and $1,000 total overapplied overhead. The volume variance was (E) a. $4,500 overapplied. c. $2,500 overapplied. b. $4,500 underapplied. d. $2,500 underapplied. L & H 10e 142.Acme had a P22,000 favorable fixed overhead budget variance, a P15,000 unfavorable variable overhead spending variance, and P2,000 total overapplied overhead. The volume variance was (E) a. P13,000 overapplied c. P5,000 overapplied b. P13,000 underapplied d. P5,000 underapplied Pol Bobadilla Page 5 of 171

MANAGEMENT ADVISORY SERVICES ACTIVITY-BASED COSTING Questions 116 thru 120 are based on the following information. Horngren Munoz, Inc. produces a special line of plastic toy racing cars. Munoz, Inc. produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc. must set up the machines and molds. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and molds for different styles of car. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2004. Actual Static-budget Amounts Amounts Units produced and sold 15,000 11,250 Batch size (number of units per 250 225 batch) Setup-hours per batch 5 5.25 Variable overhead cost per $40 $38 setup-hour Total fixed setup overhead $14,400 $14,000 costs

STANDARD COSTS AND VARIANCE ANALYSIS a. $3,200 unfavorable b. $400 unfavorable 10

7

. Calculate the spending variance for variable setup overhead costs. (D) a. $1,500 unfavorable c. $975 unfavorable b. $525 favorable d. $1,500 favorable

8

. Calculate the flexible-budget variance for variable setup overhead costs. (M) a. $1,500 unfavorable c. $975 unfavorable b. $525 favorable d. $1,500 favorable

9

. Calculate the spending variance for fixed setup overhead costs. (E)

CMA EXAMINATION QUESTIONS

. Calculate the production-volume variance for fixed setup overhead costs. (M) a. $3,200 unfavorable c. $3,600 unfavorable b. $400 unfavorable d. $400 favorable

STATIC BUDGET VARIANCE Questions 48 thru 50 are based on the following information. Horngren Abernathy Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit. Actual Budgeted Units sold 92,000 units 90,000 units Variable costs $450,800 $432,000 Fixed costs $ 95,000 $100,000 11

. What is the static-budget variance of revenues? (E) a. $20,000 favorable c. $2,000 favorable b. $20,000 unfavorable d. $2,000 unfavorable

12

. What is the static-budget variance of variable costs? (E) a. $1,200 favorable c. $20,000 favorable b. $18,800 unfavorable d. $1,200 unfavorable

13

. What is the static-budget variance of operating income? (E) a. $3,800 favorable c. $6,200 favorable b. $3,800 unfavorable d. $6,200 unfavorable

6

. Calculate the efficiency variance for variable setup overhead costs. (D) a. $1,500 unfavorable c. $975 unfavorable b. $525 favorable d. $1,500 favorable

c. $3,600 unfavorable d. $400 favorable

Questions 51 thru 53 are based on the following information. Horngren Bates Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and used a budgeted selling price of $10 per unit. Actual Budgeted Units sold 495,000 units 500,000 units Variable costs $1,250,000 $1,500,000 Page 6 of 171

MANAGEMENT ADVISORY SERVICES Fixed costs

STANDARD COSTS AND VARIANCE ANALYSIS $ 925,000

$ 900,000

14

. What is the static-budget variance of revenues? (E) a. $50,000 favorable c. $5,000 favorable b. $50,000 unfavorable d. $5,000 unfavorable

15

. What is the static-budget variance of variable costs? (E) a. $200,000 favorable c. $250,000 favorable b. $50,000 unfavorable d. $250,000 unfavorable

16

. What is the static-budget variance of operating income? (E) a. $175,000 favorable c. $225,000 favorable b. $195,000 unfavorable d. $325,000 unfavorable

department is 5,000 units per month. Indirect materials average P0.25 per direct labor hour; indirect labor cost is 12½% of direct labor cost; and other overhead are P0.15 per direct labor hour. The flexible budget at the normal capacity activity level follows: Direct materials P 4,000 Direct labor 24,000 Fixed factory overhead 1,200 Indirect materials 1,000 Indirect labor 3,000 Other overhead 600 Total P 33,800 Cost per unit P 6.76 The total production cost for one month at 80% capacity is (M) a. P20,760 c. P27,280 b. P21,500 d. P30,160 RPCPA 1082

FLEXIBLE BUDGET VARIANCE Total Manufacturing Cost Flexible Budget 17 . Aebi Corporation currently produces cardboard boxes in an automated process. Expected production per month is 20,000 units, direct-material costs are $0.60 per unit, and manufacturing overhead costs are $9,000 per month. Manufacturing overhead is allocated based on units of production. What is the flexible budget for 10,000 and 20,000 units, respectively? (E) a. $10,500; $16,500 c. $15,000; $21,000 b. $10,500; $21,000 d. none of the above Horngren

Manufacturing Cost Variance 19 . A defense contractor for a government space project has incurred $2,500,000 in actual design costs to date for a guidance system whose total budgeted design cost is $3,000,000. If the design phase of the project is 60% complete, what is the amount of the contractor's current overrun or savings on this design work? (M) A. $300,000 savings. C. $500,000 savings. B. $500,000 overrun. D. $700,000 overrun. CIA 0596 III-87

18

20

. Hemberger Corporation currently produces baseball caps in an automated process. Expected production per month is 20,000 units, direct material costs are $1.50 per unit, and manufacturing overhead costs are $23,000 per month. Manufacturing overhead is allocated based on units of production. What is the flexible budget for 10,000 and 20,000 units, respectively? (E) a. $26,500; $41,500 c. $38,000; $53,000 b. $26,500; $53,000 d. none of the above Horngren

*. Based on normal capacity operations, Sta. Ana Company employs 25 workers in its Refining Department, working 8 hours a day, 20 days per month at a wage rate of P6 per hour. At normal capacity, production in the CMA EXAMINATION QUESTIONS

. A manufacturing firm planned to manufacture and sell 100,000 units of product during the year at a variable cost per unit of $4.00 and a fixed cost per unit of $2.00. The firm fell short of its goal and only manufactured 80,000 units at a total incurred cost of $515,000. The firm’s manufacturing cost variance was (D) a. $85,000 favorable. c. $5,000 favorable. b. $35,000 unfavorable. d. $5,000 unfavorable. CMA 1293 325

Operating Income 21 . Clear Plus, Inc. manufactures and sells boxes of pocket protectors. The static master budget and the actual results for May 1995 appear below. Page 7 of 171

MANAGEMENT ADVISORY SERVICES Actual Static Budget Unit sales 12,000 10,000 Sales $132,000 $100,000 Variable costs of 70,800 60,000 sales Contribution 61,200 40,000 margin Fixed costs 32,000 30,000 Operating income $ 29,200 $ 10,000 The operating income for Clear Plus, Inc. using a flexible budget for May 1995 is a. $12,000 c. $30,000 b. $19,200 d. $18,000 CMA 0695 3-26 22

. Clear Plus, Inc. manufactures and sells boxes of pocket protectors. The static master budget and the actual results for May 1995 appear below. Actual Static Budget Unit sales 12,000 10,000 Sales $132,000 $100,000 Variable costs of 70,800 60,000 sales Contribution 61,200 40,000 margin Fixed costs 32,000 30,000 Operating income $ 29,200 $ 10,000 Which one of the following statements concerning Clear Plus, Inc.’s actual results for May 1995 is correct? a. The flexible budget variance is $8,000 favorable. b. The sales price variance is $32,000 favorable. c. The sales volume variance is $8,000 favorable. d. The fixed cost flexible budget variance is $4,000 favorable. CMA 0695 3-27

Comprehensive THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 74 THROUGH 77. Horngren CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS The actual information pertains to the month of August. As part of the budgeting process Alloway’s Fencing Company developed the following static budget for August. Alloway is in the process of preparing the flexible budget and understanding the results. Actual Results Flexible Static Budget Budget Sales volume (in # 20,000 # 25,000 units) Sales revenues $1,000,000 $ $1,250,000 Variable costs 512,000 $ 600,000 Contribution margin 488,000 $ 650,000 Fixed costs 458,000 $ 450,000 Operating profit $ 30,000 $ $ 200,000 23

. The flexible budget will report __________ for variable costs. (E) a. $512,000 c. $480,000 b. $600,000 d. $640,000

24

. The flexible budget will report __________ for the fixed costs. (E) a. $458,000 c. $360,000 b. $450,000 d. $572,500

25

. The flexible-budget variance for variable costs is (E) a. $32,000 unfavorable. c. $32,000 favorable. b. $120,000 unfavorable. d. $120,000 favorable.

77. The PRIMARY reason for low operating profits was (M) a. the variable-cost variance. b. increased fixed costs. c. a poor management accounting system. d. lower sales volume than planned. STATIC BUDGET VS. FLEXIBLE BUDGET THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 78 THROUGH 82. Horngren Peters’ Company manufacturers tires. Some of the company's data was misplaced. Use the following information to replace the lost data: Page 8 of 171

MANAGEMENT ADVISORY SERVICES Actual Results Units sold Revenue s Variable costs Fixed costs Operatin g income

FlexibleBudget Variances

#225,00 0

STANDARD COSTS AND VARIANCE ANALYSIS Flexible Budget

SalesVolume Variances

#225,00 0

Static Budget #206,2 50

$84,160

$2,000 F

(A)

$2,800 U

(C)

$400 U

$31,720

$4,680 F

$16,560

$1,720 F

$18,280

0

$35,480

(D)

$32,160

(E)

(B) $36,40 0 $18,28 0 $30,28 0

78. What amounts are reported for revenues in the flexible-budget (A) and the static-budget (B), respectively? (E) a. $82,160; $79,360 c. $84,960; $88,960 b. $82,160; $84,960 d. $84,960; $83,360 79. What are the actual variable costs (C)? (E) a. $36,400 c. $31,320 b. $32,120 d. $27,040 80. What is the total flexible-budget variance (D)? (E) a. $120 unfavorable c. $680 favorable b. $0 d. $3,320 favorable 81. What is the total sales-volume variance (E)? (E) a. $7,480 unfavorable c. $1,880 favorable b. $2,800 unfavorable d. $7,480 favorable 82. What is the total static-budget variance? (E) a. $5,200 favorable c. $1,880 unfavorable b. $3,320 favorable d. $1,880 favorable

CMA EXAMINATION QUESTIONS

STANDARD COST Unit Cost *. Based on normal capacity operations, Sta. Ana Company employs 25 workers in its Refining Department, working 8 hours a day, 20 days per month at a wage rate of P6 per hour. At normal capacity, production in the department is 5,000 units per month. Indirect materials average P0.25 per direct labor hour; indirect labor cost is 12½% of direct labor cost; and other overhead are P0.15 per direct labor hour. The flexible budget at the normal capacity activity level follows: Direct materials P 4,000 Direct labor 24,000 Fixed factory overhead 1,200 Indirect materials 1,000 Indirect labor 3,000 Other overhead 600 Total P 33,800 Cost per unit P 6.76 The cost per unit at 60% capacity is (M) a. P6.00 c. P6.82 b. P6.50 d. P6.92 RPCPA 1082 Standard Variable Cost per Unit 26 . The Max Company has developed the following standards for one of its products: Direct materials: 15 pounds x $16 per pound Direct labor: 4 hours x $24 per hour Variable manufacturing overhead: 4 hours x $14 per hour The following activity occurred during the month of October: Materials purchased: 10,000 pounds costing $170,000 Materials used: 7,200 pounds Units produced: 500 units Direct labor: 2,300 hours at $23.60/hour Actual variable manufacturing overhead: $30,000 The company records materials price variances at the time of purchase. The variable standard cost per unit is (E) a. $392 c. $296 b. $336 d. $152 H&M Page 9 of 171

MANAGEMENT ADVISORY SERVICES Standard Total Cost 6. Cascade Company, which has a $3 standard cost per unit and budgeted production at 1,000 units, actually produced 1,200 units. Total standard cost for the period is (E) a. $3,000 b. $3,600 c. An amount that cannot be determined without knowing the variances for the period. d. None of the above. D, L & H 9E MATERIALS VARIANCE Standard DM Cost per Unit 21. RTW Co. manufactures a “one-size-fits-all” ready-to-wear outfit and uses a standard cost system. Each unit of finished outfit contains two yards of fabric that cost P75 per yard. Based on experience, a 20% loss on fabric input is incurred. For each unit of outfit, the standard materials cost is (E) a. P150.00 c. P187.50 b. P180.00 d. P200.00 RPCPA 1094 27

. Dahl Co. uses a standard costing system in connection with the manufacture of a “one size fits all” article of clothing. Each unit of finished product contains 2 yards of direct material. However, a 20% direct material spoilage calculated on input quantities occurs during the manufacturing process. The cost of the direct material is $3 per yard. The standard direct material cost per unit of finished product is (E) a. $4.80 c. $7.20 b. $6.00 d. $7.50 AICPA adapted

28

. Fleece Company uses a standard-costing system in relation to its manufacture of scarves. Each finished scarf contains 1.5 yards of direct materials. However, a 25% direct materials spoilage, which is calculated based on input quantities, occurs during the manufacturing process. The cost of the direct materials is $2.00 per yard. The standard direct materials cost per unit of finished product is (E) A. $2.25 C. $3.75 B. $3.00 D. $4.00 Gleim

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS *. Hankies Unlimited has a signature scarf for ladies that is very popular. Certain production and marketing data are indicated below: Cost per yard of cloth P36.00 Allowance for rejected scarf 5% of production Yards of cloth needed per scarf 0.475 yard Airfreight from supplier P0.60/yard Motor freight to customers P0.90 /scarf Purchase discounts from supplier 3% Sales discount to customers 2% The allowance for rejected scarf is not part of the 0.475 yard of cloth per scarf. Rejects have no market value. Materials are used at the start of production. Calculate the standard cost of cloth per scarf that Hankies Unlimited should use in its cost sheets. (M) a. P16.87 c. P18.21 b. P17.76 d. P17.30 RPCPA 0594 8. Alejo Company is a chemical manufacturer that supplies industrial users. The company plans to introduce a new chemical solution and needs to develop a standard product cost for this new solution. The new chemical solution is made by combining a chemical compound (nyclin) and a solution (salex), boiling the mixture, adding a second compound (protet), and bottling the resulting solution in 20-liter containers. The initial mix, which is 20 liters in volume consists of 24 kilograms of nyclyn and 19.2 liters of salex. A 20% reduction in volume occurs during the boiling process. The solution is then cooled slightly before 10 kilograms of protet are added: the addition of protet does not affect the total liquid volume. The purchase prices of the raw materials used in the manufacture of this new chemical solution are as follows: Nyclyn P15.00 per kilogram Salex P21.00 per kilogram Protet P28.00 per kilogram The total standard materials cost of 20 liters of the product is (D) A. P1,043,20 C. P1,304.00 B. P834.56 D. P1,234.00 Pol Bobadilla Page 10 of 171

MANAGEMENT ADVISORY SERVICES Standard Quantity per Unit 29 . Sexson Corporation uses a standard cost system. The following information pertains to direct materials for the month of May. Standard price per lb. $12.00 Actual purchase price per lb. $11.00 Quantity purchased 6,200 lbs. Quantity used 5,900 lbs. Standard quantity allowed for actual output 6,000 lbs. Actual output 1,000 units Sexson reports its material price variances at the time of purchase. What is the standard quantity of direct materials per unit for Sexson Corporation? (E) a. 7.00 lbs. d. 5.90 lbs. b. 6.50 lbs. e. 6.00 lbs. c. 6.20 lbs. H&M Flexible Budget 30 . A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio requires three units each of Part X, which has a standard cost of $2.90 per unit. During June, the company had the following experience with respect to Part X: Units Purchases ($36,000) 12,000 Consumed in manufacturing 10,000 Radios manufactured 3,000 The amount that will be shown on a flexible budget for Part X usage during the month of June is (E) a. $26,100 c. $29,000 b. $27,000 d. $36,000 Gleim Material Price Variance Based on Quantity Purchased 31 . Garland Company uses a standard cost system. The standard for each finished unit of product allows for 3 pounds of plastic at $0.72 per pound. During December, Garland bought 4,500 pounds of plastic at $0.75 per pound, and used 4,100 pounds in the production of 1,300 finished units of CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS product. What is the materials purchase price variance for the month of December? (E) a. $117 unfavorable. c. $135 unfavorable. b. $123 unfavorable. d. $150 unfavorable. CMA Samp Q311 18. The standard price of a material is $2 per pound. The company bought 2,000 pounds at $1.90 per pound and used 1,700 pounds. Standard use was 1,800 pounds. The material price variance was (E) a. $170 favorable. c. $200 favorable. b. $180 favorable. d. $400 favorable. D, L & H 9e 38. The standard usage for raw materials is 5 pounds at $4 per pound. ABC Company spent $13,940 in purchasing 3,400 pounds. ABC used 3,150 pounds to produce 600 units of finished product. The material price variance is (E) a. $340 unfavorable. c. $600 unfavorable. b. $400 unfavorable. d. $1,340 unfavorable. D, L & H 9e 40. Last month 75,000 pounds of direct material were purchased and 71,000 pounds were used. If the actual purchase price per pound was $0.50 more than the standard purchase price per pound, then the material price variance was: (E) a. $2,000 F. c. $37,500 U. b. $37,500 F. d. $35,500 U. G & N 9e 32

. Assume that the standard cost to make one widget includes 5 units of raw materials at a price of $3 per unit. In July, 17,000 units of raw materials were purchased for $50,400, and 10,400 units of raw materials were used to produce 2,000 units of finished product. The material price variance is recorded at the time of purchase. What is the materials price variance for July? (E) a. $2,400 (U) d. $400 (U) b. $600 (F) e. $600 (U) c. $1,200 (U) H&M

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MANAGEMENT ADVISORY SERVICES 42. PRECISION Instruments established a standard cost for raw materials at P25 per unit. During the period just ended, a total of 10,000 units were purchased of which 50% was at P24.70 each, 20% was at P24.90 each, and the balance was at P25.60 each. The raw materials cost variance is a favorable (an unfavorable) (M) a. P100 c. P(100) b. P900 d. P(900) RPCPA 1097 82. Kauai Mfg. Co. produces beach chairs. Chair frames are all the same size, but can be made from plastic, wood, or aluminum. Regardless of frame choice, the same sailcloth is used for the seat on all chairs. Kauai has set a standard for sailcloth of $9.90 per square yard and each chair requires 1 square yard of material. Kauai produced 500 plastic chairs, 100 wooden chairs, and 250 aluminum chairs during June. The total cost for 1,000 square yards of sailcloth during the month was $10,000. At the end of the month, 50 square yards of sailcloth remained in inventory. The unfavorable material price variance for sailcloth purchases for the month was (E) a. $100. c. $1,090. b. $495. d. $1,585. Barfields 33

. A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio requires three units each of Part X, which has a standard cost of $2.90 per unit. During June, the company had the following experience with respect to Part X: Units Purchases ($36,000) 12,000 Consumed in manufacturing 10,000 Radios manufactured 3,000 During June, the company incurred a materials purchase-price variance of (E) a. $900 unfavorable. c. $1,200 unfavorable. b. $900 favorable. d. $1,200 favorable. Gleim

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 38. Perkins Company, which has a standard cost system, had 500 pounds of raw material X in its inventory at June 1, purchased in May for $1.20 per pound and carried at a standard cost of $1.00 per pound. The following information pertains to raw material X for the month of June: Actual pounds purchased 1,400 Actual pounds used 1,500 Standard pounds allowed for actual production 1,300 Standard cost per pound $1.00 Actual cost per pound $1.10 The unfavorable materials purchase price variance for raw material X for June was: (E) A. $ 0. C. $140. B. $130. D. $150. G & N 10e 87. The following materials standards have been established for a particular product: Standard quantity per unit of output 1.9 grams Standard price $18.00 per gram The following data pertain to operations concerning the product for the last month: Actual materials purchased 5,800 grams Actual cost of materials purchased $108,460 Actual materials used in production 5,200 grams Actual output 2,700 units What is the materials price variance for the month? (E) a. $4,060 U c. $3,640 U b. $3,640 F d. $4,060 F G & N 9e 43. The following materials standards have been established for a particular product: Standard quantity per unit of output 8.3 grams Standard price $19.15 per gram The following data pertain to operations concerning the product for the last month: Actual materials purchased 7,500 grams Actual cost of materials purchased $141,375 Actual materials used in production 7,100 grams Page 12 of 171

MANAGEMENT ADVISORY SERVICES Actual output What is the materials price variance for the month? (E) a. $2,250 F c. $24,317 U b. $7,540 U d. $7,660 U

STANDARD COSTS AND VARIANCE ANALYSIS 700 units G & N 9e

74. The following materials standards have been established for a particular product: Standard quantity per unit of output 8.7 grams Standard price $15.30 per gram The following data pertain to operations concerning the product for the last month: Actual materials purchased 3,900 grams Actual cost of materials purchased $56,550 Actual materials used in production 3,600 grams Actual output 400 units What is the materials price variance for the month? (E) A. $2,880 F C. $2,880 U B. $3,120 U D. $3,120 F G & N 10e 85. The following materials standards have been established for a particular product: Standard quantity per unit of output 4.4 pounds Standard price $13.20 per pound The following data pertain to operations concerning the product for the last month: Actual materials purchased 4,800 pounds Actual cost of materials purchased $62,880 Actual materials used in production 4,300 pounds Actual output 700 units What is the materials price variance for the month? (E) a. $480 F c. $430 U b. $430 F d. $480 U G & N 9e 76. The following materials standards have been established for a particular product: Standard quantity per unit of output 3.2 feet Standard price $10.10 per feet CMA EXAMINATION QUESTIONS

The following data pertain to operations concerning the product for the last month: Actual materials purchased 5,900 feet Actual cost of materials purchased $60,475 Actual materials used in production 5,400 feet Actual output 1,400 units What is the materials price variance for the month? (E) A. $885 U C. $885 F B. $810 U D. $810 F G & N 10e 40. The following materials standards have been established for a particular product: Standard quantity per unit of output 5.3 meters Standard price $17.20 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 8,100 meters Actual cost of materials purchased $141,345 Actual materials used in production 7,600 meters Actual output 1,400 units What is the materials price variance for the month? (E) A. $3,141 U C. $8,600 U B. $2,025 U D. $8,725 U G & N 10e 89. The following materials standards have been established for a particular product: Standard quantity per unit of output 6.8 meters Standard price $17.10 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 9,000 meters Actual cost of materials purchased $156,600 Actual materials used in production 8,500 meters Actual output 1,200 units What is the materials price variance for the month? (E) a. $2,700 F c. $2,550 F b. $2,550 U d. $2,700 U G & N 9e Page 13 of 171

MANAGEMENT ADVISORY SERVICES .

34

35

STANDARD COSTS AND VARIANCE ANALYSIS

Gazarra Company has supplied you with the following data relating to the material required to manufacture mini-ring-nickers: Standard price per ounce of material $1.25 Standard quantity of material per mini-ring-nicker 4 oz. Actual material purchased 2,800 oz. Actual material used in production 2,200 oz. Actual mini-ring-nickers produced 520 units Actual cost of material purchased $3,920 If Gazarra had planned to produce a total of 550 mini-ring-nickers during the year, its material price variance was (E) A. $330 unfavorable. D. $78 unfavorable. B. $420 unfavorable. E. $0.15 unfavorable. C. $770 unfavorable. Flamholtz & Diamond . Blaster Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio requires three units each of Part XBEZ52 which has a standard cost of $1.45 per unit. During May 1995, Blaster experienced the following with respect to Part XBEZ52. Units Purchases ($18,000) 12,000 Consumed in manufacturing 10,000 Radios manufactured 3,000 During May 1995, Blaster Inc. incurred a purchase price variance of (E) a. $450 unfavorable. c. $500 favorable. b. $450 favorable. d. $600 unfavorable.CMA 0695 3-23 . A company manufactures a product that has the direct materials, standard cost presented below. Budgeted and actual information for the current month for the manufacture of the finished product and the purchase and use of the direct materials is also presented.

Standard cost for direct materials – 1.60 lbs. @ $2.50 per lb. = $4.00 Finished goods (in units) Direct materials usage (in pounds) Direct materials purchases (in CMA EXAMINATION QUESTIONS

Budget 30,000 48,000 48,000

Actual 32,000 51,000 50,000

pounds) Total cost of direct materials $120,000 $120,000 purchases The direct materials price variance for the current month is (E) a. $7,500 unfavorable. c. $5,000 favorable. b. Zero. d. $5,100 favorable. CIA 1196 III-80 36

. A manufacturer has the following direct materials standard for one of its products. Direct materials: 3 pounds @ $1.60/pound = $4.80 The company records all inventory at standard cost. Data for the current period regarding the manufacturer's budgeted and actual production for the product as well as direct materials purchases and issues to production for manufacture of the product are presented as follows. Budgeted production for the period 8,000 units Actual production for the period 7,500 units Direct materials purchases: Pounds purchased 25,000 pounds Total cost $38,750 Direct materials issued to production 23,000 pounds The direct materials price variance for the current period is (E) A. $1,125 favorable. C. $1,200 favorable. B. $1,150 favorable. D. $1,250 favorable. CIA 1192 IV20

37

. The Max Company has developed the following standards for one of its products: Direct materials: 15 pounds x $16 per pound Direct labor: 4 hours x $24 per hour Variable manufacturing overhead: 4 hours x $14 per hour The following activity occurred during the month of October: Materials purchased: 10,000 pounds costing $170,000 Materials used: 7,200 pounds Units produced: 500 units Direct labor: 2,300 hours at $23.60/hour Actual variable manufacturing overhead: $30,000 The company records materials price variances at the time of purchase. Page 14 of 171

MANAGEMENT ADVISORY SERVICES The direct materials price variance is (E) a. $50,000 favorable c. $10,000 unfavorable b. $50,000 unfavorable d. $10,000 favorable

STANDARD COSTS AND VARIANCE ANALYSIS

H&M

*. Valenzuela Plastics Inc. has set a standard cost, P5.25 per unit for Material D and P12.25 per unit for Material E. In June, Valenzuela bought 17,500 units of Material D and 8,750 units of Material E. All Material D, except 1,400 units were bought at the standard unit cost. The 1,400 units had a unit cost of P6.15. Valenzuela bought 7,875 units of Material E at standard cost and 875 units at a unit cost of P14. In accordance with the standard two units of Material D and one unit of Material E should be used to make each unit of Product F. In January, 7,000 units of Product F were made and 15,050 units of Material D were used and 7,175 units of Material E were used. The total materials price variance is (M) a. P2,791.25 favorable c. P13,781.25 favorable b. P2,791,25 unfavorable d. P13,781.25 unfavorable RPCPA 1083 Based on Quantity Purchased and Used 38 . The standard direct material cost to produce a unit of Lem is 4 meters of material at $2.50 per meter. During May 2001, 4,200 meters of material costing $10,080 were purchased and used to produce 1,000 units of Lem. What was the material price variance for May 2001? (E) a. $400 favorable. c. $80 unfavorable. b. $420 favorable. d. $480 unfavorable. AICPA 1195 39

. Data regarding Mill Company's direct materials costs is as follows: Actual unit cost $2.00 Standard unit cost 2.20 Actual quantity purchased and used 28,000 units Standard units of materials per unit of finished goods 3 units Actual output of finished goods 9,000 units What is the direct materials price variance? (E) A. $2,800 favorable. C. $5,600 favorable. B. $5,600 unfavorable. D. $2,200 unfavorable. Gleim

CMA EXAMINATION QUESTIONS

Actual Price 47. ALPHA Co. uses a standard cost system. Direct materials statistics for the month of May, 19x7 are summarize below: Standard unit price P90.00 Actual units purchased 40,000 Standard units allowed for actual production 36,250 Materials price variance- favorable P6,000 What was the actual purchase price per unit? (M) a. P75.00 c. P88.50 b. P85.89 d. P89.85 RPCPA 0597 40

. Information on Kennedy Company's direct material costs follows: Standard price per pound of raw materials $3.60 Actual quantity of raw materials purchased 1,600 pounds Standard quantity allowed for actual production 1,450 pounds Materials purchase price variance--favorable $ 240 What was the actual purchase price per unit, rounded to the nearest penny? (M) a. $3.06. c. $3.45. b. $3.11. d. $3.75. AICPA adapted

41. The Wright Company has a standard costing system. The following data are available for September: Actual quantity of direct materials purchased 25,000 pounds Standard price of direct materials $2 per pound Material price variance $2,500 unfavorable The actual price per pound of direct materials purchased in September is: (M) A. $1.85. C. $2.10. B. $2.00. D. $2.15. G & N 10e Actual Purchases 17. Cascade Company bought 10,000 pounds of material and used 9,500. The material price variance was $300 unfavorable and the standard price per pound is $3. The cost of materials purchased was (E) a. $28,200 c. $29,700 b. $28,800 d. $30,300 D, L & H 9e Page 15 of 171

MANAGEMENT ADVISORY SERVICES Standard Price 41 . During December, 6,000 pounds of raw materials were purchased at a cost of $16 per pound. If there was an unfavorable direct materials price variance of $6,000 for December, the standard cost per pound must be (E) a. $17 c. $15 b. $16 d. $14 H&M 42. The standard cost card for one unit of a certain finished product shows the following: Standard Quantity or Standard Price or Hours Rate Direct materials 10 pounds $ ? per pound Direct labor 2.5 hours $16 per hour Variable manufacturing 1.5 hours $10 per hour overhead If the total standard variable cost for one unit of finished product is $85, then the standard price per pound for direct materials is: (M) A. $1.74. C. $5.90. B. $4.60. D. $3.00. G & N 10e Material Quantity Variance 37. Cox Company's direct material costs for the month of January were as follows: Actual quantity purchased 18,000 kilograms Actual unit purchase price $ 3.60 per kilogram Materials price variance – unfavorable (based on purchases) $ 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: (M) a. $3,360. c. $3,400. b. $3,375. d. $3,800. G & N 9e

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Materials Quantity Variance Actual Quantity Used 42 . During April, 80,000 units were produced. The standard quantity of material allowed per unit was 2 pounds at a standard cost of $5 per pound. If there was a favorable usage variance of $40,000 for April, the actual quantity of materials used must have been (M) a. 168,000 pounds c. 84,000 pounds b. 152,000 pounds d. 76,000 pounds H&M 43

. During April, 20,000 units were produced. The standard quantity of material allowed per unit was 4 pounds at a standard cost of $6 per pound. If there was an unfavorable usage variance of $30,000 for April, the actual quantity of materials used must be (M) a. 85,000 pounds c. 21,250 pounds b. 75,000 pounds d. 18,750 pounds H&M

44

. ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material in inventory were purchased for $105,000, 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 $60,000, and there was an unfavorable quantity variance of $2,500. The units of material used to produce November output totaled (M) a. 12,000 units c. 23,000 units b. 12,500 units d. 25,000 units CMA 1293 3-23

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MANAGEMENT ADVISORY SERVICES Actual Price 44. The Swenson Company has a standard costing system. The following data are available for June: Actual quantity of direct materials purchased 35,000 pounds Standard price of direct materials $4 per pound Material price variance $7,000 unfavorable Material quantity variance $4,200 favorable The actual price per pound of direct materials purchased in June is: (M) A. $3.92. C. $4.08. B. $4.32. D. $4.20. G & N 10e Standard Quantity Allowed 45. 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 $2 per pound Material quantity variance $1,000 favorable The standard quantity of material allowed for October production is: (M) a. 23,000 lbs. c. 24,500 lbs. b. 24,000 lbs. d. 25,000 lbs. G & N 9e 43. The Cox Company uses standard costing. The following data are available for April: Actual quantity of direct materials used 12,200 gallons Standard price of direct materials $4 per gallon Material quantity variance $2,000 unfavorable The standard quantity of material allowed for April production is: (M) A. 14,200 gallons. C. 11,700 gallons. B. 12,700 gallons. D. 10,200 gallons. G & N 10e Standard Unit Cost 45 . ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material in inventory were purchased for $105,000, 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 $60,000, and there was an CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS unfavorable quantity variance of $2,500. ChemKing’s standard price for one unit of material is (E) a. $2.50 c. $5.00 b. $3.00 d. $6.00 CMA 1293 3-22 Materials Quantity Variance 39. The standard usage for raw materials is 5 pounds at $4.00 per pound. ABC Company spent $13,940 in purchasing 3,400 pounds. ABC used 3,150 pounds to produce 600 units of finished product. The material quantity variance is (E) a. $340 unfavorable. c. $600 unfavorable. b. $400 unfavorable. d. $1,340 unfavorable. D, L & H 9e 36. Home Company manufactures tables with vinyl tops. The standard material cost for the vinyl used per Type-R table is $7.80 based on six square feet of vinyl at a cost of $1.30 per square foot. A production run of 1,000 tables in January resulted in usage of 6,400 square feet of vinyl at a cost of $1.20 per square foot, a total cost of $7,680. The quantity variance resulting from the above production run was: (E) A. $120 favorable. C. $520 unfavorable. B. $480 unfavorable. D. $640 favorable. G & N 10e 83. Kauai Mfg. Co. produces beach chairs. Chair frames are all the same size, but can be made from plastic, wood, or aluminum. Regardless of frame choice, the same sailcloth is used for the seat on all chairs. Kauai has set a standard for sailcloth of $9.90 per square yard and each chair requires 1 square yard of material. Kauai produced 500 plastic chairs, 100 wooden chairs, and 250 aluminum chairs during June. The total cost for 1,000 square yards of sailcloth during the month was $10,000. At the end of the month, 50 square yards of sailcloth remained in inventory. Assuming that there was no sailcloth in inventory at the beginning of June, the unfavorable material quantity variance for the month was (E) a. $495. c. $990. b. $500. d. $1,000. Barfields

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MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

46

. A company uses a standard cost system to account for its only product. The materials standard per unit was 4 lbs. at $5.10 per lb. Operating data for April were as follows: Material used 7,800 lbs. Cost of material used $40,950 Number of finished units produced 2,000 The material usage variance for April was: (E) A. $1,020 favorable C. $1,170 unfavorable B. $1,050 favorable D. $1,200 unfavorable CIA adapted

47

. A manufacturer of radios purchases components from subcontractors for assembly into complete radios. Each radio requires three units each of Part X, which has a standard cost of $2.90 per unit. During June, the company had the following experience with respect to Part X: Units Purchases ($36,000) 12,000 Consumed in manufacturing 10,000 Radios manufactured 3,000 During June, the company incurred a materials efficiency variance of (E) a. $2,900 unfavorable. c. $8,700 unfavorable. b. $2,900 favorable. d. $8,700 favorable. Gleim

41. During March, Younger Company's direct material costs for product T were as follows: Actual unit purchase price $6.50 per meter Standard quantity allowed for actual production 2,100 meters Quantity purchased and used for actual production 2,300 meters Standard unit price $6.25 per meter Younger's material quantity variance for March was: (E) a. $1,250 unfavorable. c. $1,300 unfavorable. b. $1,250 favorable. d. $1,300 favorable. AICPA adapted 48

. Assume that the standard cost to make one widget includes 5 units of raw materials at a price of $3 per unit. In July, 17,000 units of raw materials were purchased for $50,400, and 10,400 units of raw materials were used to produce 2,000 units of finished product. The material price variance is recorded at the time of purchase.

CMA EXAMINATION QUESTIONS

What is the materials usage variance? (E) a. $1,200 (U) d. $600 (U) b. $400 (U) e. $0 c. $600 (F)

H&M

49

. Sexson Corporation uses a standard cost system. The following information pertains to direct materials for the month of May. Standard price per lb. $12.00 Actual purchase price per lb. $11.00 Quantity purchased 6,200 lbs. Quantity used 5,900 lbs. Standard quantity allowed for actual output 6,000 lbs. Actual output 1,000 units Sexson reports its material price variances at the time of purchase. What is the material usage variance for Sexson Corporation? (E) a. $1,200 (F) d. $1,200 (U) b. $2,600 (F) e. $6,200 (F) c. $3,800 (F) H&M

42. The following materials standards have been established for a particular product: Standard quantity per unit of output 1.7 meters Standard price $19.80 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 5,800 meters Actual cost of materials purchased $113,680 Actual materials used in production 5,100 meters Actual output 3,200 units What is the materials quantity variance for the month? (E) a. $13,720 U c. $13,860 U b. $6,732 F d. $6,664 F G & N 9e 90. The following materials standards have been established for a particular product: Standard quantity per unit of output 6.8 meters Standard price $17.10 per meter Page 18 of 171

MANAGEMENT ADVISORY SERVICES The following data pertain to operations concerning the product for the last month: Actual materials purchased 9,000 meters Actual cost of materials purchased $156,600 Actual materials used in production 8,500 meters Actual output 1,200 units What is the materials quantity variance for the month? (E) a. $5,814 U c. $5,916 U b. $8,700 U d. $8,550 U G & N 9e 77. The following materials standards have been established for a particular product: Standard quantity per unit of output 3.2 feet Standard price $10.10 per feet The following data pertain to operations concerning the product for the last month: Actual materials purchased 5,900 feet Actual cost of materials purchased $60,475 Actual materials used in production 5,400 feet Actual output 1,400 units What is the materials quantity variance for the month? A. $5,050 U C. $9,292 U B. $5,125 U D. $9,430 U G & N 10e 88. The following materials standards have been established for a particular product: Standard quantity per unit of output .. 1.9 grams Standard price ........................ $18.00 per gram The following data pertain to operations concerning the product for the last month: Actual materials purchased ............ 5,800 grams Actual cost of materials purchased .... $108,460 Actual materials used in production ... 5,200 grams Actual output ......................... 2,700 units What is the materials quantity variance for the month? (E) a. $1,260 U c. $11,220 U b. $1,309 U d. $10,800 U G & N 9e CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 39. The following materials standards have been established for a particular product: Standard quantity per unit of output 4.6grams Standard price $15.05 per gram The following data pertain to operations concerning the product for the last month: Actual materials purchased 3,100 grams Actual cost of materials purchased $44,020 Actual materials used in production 2,400 grams Actual output 300 units What is the materials quantity variance for the month? (E) A. $9,940 U C. $14,484 U B. $15,351 U D. $10,535 U G & N 10e 75. The following materials standards have been established for a particular product: Standard quantity per unit of output 8.7 grams Standard price $15.30 per gram The following data pertain to operations concerning the product for the last month: Actual materials purchased 3,900 grams Actual cost of materials purchased $56,550 Actual materials used in production 3,600 grams Actual output 400 units What is the materials quantity variance for the month? (E) A. $1,740 U C. $4,590 U B. $4,350 U D. $1,836 U G & N 10e 86. The following materials standards have been established for a particular product: Standard quantity per unit of output .. 4.4 pounds Standard price ........................ $13.20 per pound The following data pertain to operations concerning the product for the last month: Actual materials purchased ............ 4,800 pounds Actual cost of materials purchased .... $62,880 Page 19 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Actual materials used in production ... 4,300 pounds Actual output ......................... 700 units What is the materials quantity variance for the month? (E) a. $6,550 U c. $16,104 U b. $15,982 U d. $6,600 U G & N 9e .

50

51

Gazarra Company has supplied you with the following data relating to the material required to manufacture mini-ring-nickers: Standard price per ounce of material $1.25 Standard quantity of material per mini-ring-nicker 4 oz. Actual material purchased 2,800 oz. Actual material used in production 2,200 oz. Actual mini-ring-nickers produced 520 units Actual cost of material purchased $3,920 If Gazarra had planned to produce a total of 360 moni-ring-nickers during the year, its material quantity variance was (E) A. $200 unfavorable. D. $1,008 unfavorable. B. $900 unfavorable. E. $168 unfavorable. C. $150 unfavorable. Flamholtz & Diamond . Blaster Inc., a manufacturer of portable radios, purchases the components from subcontractors to use to assemble into a complete radio. Each radio requires three units each of Part XBEZ52 which has a standard cost of $1.45 per unit. During May 1995, Blaster experienced the following with respect to Part XBEZ52. Units Purchases ($18,000) 12,000 Consumed in manufacturing 10,000 Radios manufactured 3,000 During May 1995, Blaster Inc. incurred a materials efficiency variance of (E) a. $1,450 unfavorable. c. $4,350 unfavorable. b. $1,450 favorable. d. $4,350 favorable. CMA 0695 3-24 . A company manufactures a product that has the direct materials, standard cost presented below. Budgeted and actual information for the current month for the manufacture of the finished product and the purchase and use of the direct materials is also presented.

CMA EXAMINATION QUESTIONS

Standard cost for direct materials – 1.60 lbs. @ $2.50 per lb. = $4.00 Budget Actual Finished goods (in units) 30,000 32,000 Direct materials usage (in pounds) 48,000 51,000 Direct materials purchases (in 48,000 50,000 pounds) Total cost of direct materials $120,000 $120,000 purchases The direct materials efficiency variance for the current month is (E) a. $500 favorable. c. $7,500 unfavorable. b. $3,000 favorable. d. $8,000 unfavorable. CIA 1196 III81 52

. A manufacturer has the following direct materials standard for one of its products. Direct materials: 3 pounds @ $1.60/pound = $4.80 The company records all inventory at standard cost. Data for the current period regarding the manufacturer's budgeted and actual production for the product as well as direct materials purchases and issues to production for manufacture of the product are presented as follows. Budgeted production for the period 8,000 units Actual production for the period 7,500 units Direct materials purchases: Pounds purchased 25,000 pounds Total cost $38,750 Direct materials issued to production 23,000 pounds The materials efficiency variance for the current period is (E) A. $775 unfavorable. C. $1,600 favorable. B. $800 unfavorable. D. $3,200 favorable. CIA 1192 IV21

*. Valenzuela Plastics Inc. has set a standard cost, P5.25 per unit for Material D and P12.25 per unit for Material E. In June, Valenzuela bought 17,500 units of Material D and 8,750 units of Material E. All Material D, except 1,400 units were bought at the standard unit cost. The 1,400 units had a unit cost of P6.15. Valenzuela bought 7,875 units of Material E at standard cost and 875 units at a unit cost of P14. Page 20 of 171

MANAGEMENT ADVISORY SERVICES In accordance with the standard two units of Material D and one unit of Material E should be used to make each unit of Product F. In January, 7,000 units of Product F were made and 15,050 units of Material D were used and 7,175 units of Material E were used. The total materials quantity variance is (M) a. P7,656.25 favorable c. P13,781.25 favorable b. P7,656.25 unfavorable d. P13,781.25 unfavorable RPCPA 1083 Direct Materials Price Variance 39. Information on Fleming Company's direct material costs follows: Actual amount of direct materials used 20,000 pounds Actual direct material costs $40,000 Standard price of direct materials $2.10 per pound Direct material efficiency variance--favorable $3,000 What was the company's direct material price variance? (E) a. $1,000 favorable. c. $2,000 favorable. b. $1,000 unfavorable. d. $2,000 unfavorable. AICPA adapted *. Information on the direct material costs of Bernal Manufacturing Corp. is as follows: Actual direct material costs P 44,000 Actual units of direct material used 22,000 Standard price per unit of direct material P2.20 Direct material efficiency variance-unfavorable P2,800 What was Bernal’s direct material price variance? (E) a. P4,400 favorable. c. P5,600 favorable. b. P4,400 unfavorable. d. P5,600 unfavorable. RPCPA 1079 53

. ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of raw material in inventory were purchased for $105,000, 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 $60,000, and there was an unfavorable quantity variance of $2,500. The materials price variance for the units used in November was (M)

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS a. $2,500 unfavorable. b. $11,000 unfavorable. 54

c. $12,500 unfavorable. d. $3,500 favorable. CMA 1293 3-24

. Information on Duke Co.'s direct material costs for May is as follows: Actual quantity of direct materials purchased and used 30,000lbs. Actual cost of direct materials $84,000 Unfavorable direct materials usage variance 3,000 Standard quantity of direct materials allowed for May production29,000 lbs. For the month of May, Duke's direct materials price variance was: (D) A. $2,800 favorable C. $6,000 unfavorable B. $2,800 unfavorable D. $6,000 favorable Carter & Usry

23. Information on Energy’s direct material costs for October is as follows: Actual quantity of direct materials purchased and used 30,000 lbs. Actual cost of direct materials P92,000 Unfavorable direct materials usage variance P 3,000 Standard quantity of direct materials allowed for May production 29,000 lbs For the month of October, Energy’s direct materials price variance was: (D) a. P3,000 favorable c. P2,000 unfavorable b. P2,000 favorable d. P2,000 favorable Pol Bobadilla 38. 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 $53,000; the materials quantity variance was $1,875 Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds. The materials price variance for July was: (D) a. $2,725 F. c. $3,250 F. b. $2,725 U d. $3,250 U. G & N 9e Materials Variance Given Actual Price 55 . The controller of Durham Skates is reviewing the production cost report for July. An analysis of direct materials costs reflects an unfavorable flexible budget variance of $25. The plant manager believes this is excellent performance on a flexible budget for 5,000 units of direct materials. Page 21 of 171

MANAGEMENT ADVISORY SERVICES However, the production supervisor is not pleased with this result because he claims to have saved $1,200 in material cost on actual production using 4,900 units of direct materials. The standard materials cost is $12 per unit. Actual materials used for the month amounted to $60,025. The actual average cost per unit for materials was (E) a. $12.00 c. $12.24 b. $12.01 d. $12.25 CMA 0697 3-22 Price Variance 56 . The controller of Durham Skates is reviewing the production cost report for July. An analysis of direct materials costs reflects an unfavorable flexible budget variance of $25. The plant manager believes this is excellent performance on a flexible budget for 5,000 units of direct materials. However, the production supervisor is not pleased with this result because he claims to have saved $1,200 in material cost on actual production using 4,900 units of direct materials. The standard materials cost is $12 per unit. Actual materials used for the month amounted to $60,025. If the direct materials variance is investigated further, it will reflect a price variance of (M) a. Zero. c. $1,225 unfavorable. b. $1,200 favorable. d. $2,500 favorable. CMA 0697 3-23 Materials Price & Quantity Variance - Given Actual Cost 57 . Hector’s Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Variances Flexible Budget Price Efficiency Material A $20,000 $1,000U $1,200F Material B 30,000 500F 800U Material C 40,000 1,400U 1,000F The actual amount spent for Material A was (E) a. $18,800. c. $19,800. b. $20,200. d. $21,000. Horngren

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 58

. Hector’s Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Variances Flexible Budget Price Efficiency Material A $20,000 $1,000U $1,200F Material B 30,000 500F 800U Material C 40,000 1,400U 1,000F The actual amount spent for Material B was (E) a. $29,700. c. $30,500. b. $30,800. d. $30,300. Horngren

Standard Quantity Allowed 41. Acme has a standard price of $6 per pound for materials. July’s results showed an unfavorable materials price variance of $44 and a favorable quantity variance of $228. If 1,066 pounds were used in production, what was the standard quantity allowed for materials? (M) a. 1,066 c. 1,294 b. 1,104 d. Some other number. D, L & H 9e .

The cost accountant for Hando Company has just informed you that the company’s material quantity variance was exactly equal to the company’s material price variance for the year. The company had expected to produce 450 units of its product. However, because of a slump in the economy, it was only able to justify the production of 400 units. Other cost information relating to the company’s raw materials activity is shown below: Standard price per ton of material $ 50 Actual tons purchased during the period 10 Actual tons used in production during the period 8 Actual cost of material purchased during the period $600 Number of pounds in 1 ton 2,000 The standard quantity of materials allowed for the number of units produced by Hando totalled (M) A. 6.4 tons. C. 8.4 tons. B. 8.0 tons. D. 6.0 tons Page 22 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Actual Units Produced . JKL Company has a standard of 15 parts of component X costing P1.50 each. JKL purchased 14,910 units of component X for P22,145. JKL 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? (M) A. 994 units. C. 1,000 units B. 1,090 units. D. 1,160 units RPCPA 1001 40. Acme has a standard of 15 parts of component X costing $1.50 each. Acme purchased 14,910 units of X for $21, 950. Acme generated a $415 favorable price variance and a $3,735 favorable quantity variance. If there were no changes in the component inventory, how many units of finished product were produced? (M) a. 994 units. c. 1,160 units. b. 1,000 units. d. Some other number. D, L & H 9e Materials Quantity Variance . The cost accountant for Hando Company has just informed you that the company’s material quantity variance was exactly equal to the company’s material price variance for the year. The company had expected to produce 450 units of its product. However, because of a slump in the economy, it was only able to justify the production of 400 units. Other cost information relating to the company’s raw materials activity is shown below: Standard price per ton of material $ 50 Actual tons purchased during the period 10 Actual tons used in production during the period 8 Actual cost of material purchased during the period $600 Number of pounds in 1 ton 2,000 Hando’s material quantity variance was (M) A. $80 unfavorable. C. $100 unfavorable. B. $80 favorable. D. $100 favorable. Excess Usage per Unit Produced . The cost accountant for Hando Company has just informed you that the company’s material quantity variance was exactly equal to the company’s CMA EXAMINATION QUESTIONS

material price variance for the year. The company had expected to produce 450 units of its product. However, because of a slump in the economy, it was only able to justify the production of 400 units. Other cost information relating to the company’s raw materials activity is shown below: Standard price per ton of material $ 50 Actual tons purchased during the period 10 Actual tons used in production during the period 8 Actual cost of material purchased during the period $600 Number of pounds in 1 ton 2,000 On the average, Hando used exceeded its standard materials allowed by (D) A. 20 pounds per unit produced. D. 8 pounds per unit produced. B. 18 pounds per unit produced. E. 9 pounds per unit produced. C. 10 pounds per unit produced. Materials Price & Quantity Variances 44. If the current material standard calls for the use of 100,000 units at P1.00 each, but the actual usage was 105,000 units at P0.90 each, the variances to be explained are (E) RPCPA 0596 a. b. c. d. Price Variance P10,000 fav P10,000 P10,500 fav P10,500 unfav unfav Quantity P 4,500 P4,500 fav P5,000 unfav P5,000 fav Variance unfav 59

. A company producing a single product employs the following direct material cost standard for each unit of output: 3 pounds of material x $4/pound = $12/output unit Data regarding the operations for the current month are as follows: Planned production 26,000 units Actual production 23,000 units Actual purchases of direct materials (75,000 $297,000 pounds) Direct materials used in production 70,000 pounds Page 23 of 171

MANAGEMENT ADVISORY SERVICES What would be the amount of the direct materials purchase price variance and direct materials quantity variance that the company would recognize for the month?(E) CIA 1191 IV-16 A. B. C. D. Purchase Price $ 3,120 F $ 3,000 F $3,000 F $2,800 F Variance Quantity Variance $32,000 F $24,000 U $4,000 U $4,000 U 37. Throop Company's standards call for one kilogram of materials for each unit of output at a cost of $2 per kilogram for the raw materials. Actual output was 50,000 units of product requiring 45,000 kilograms of raw materials at a cost of $2.10 per kilogram. There were no beginning or ending inventories of raw materials. The direct material price variance and quantity variance were: G & N 10e A. B. C. D. Price Variance $ 4,500 U $ 5,000 F $ 5,000 U $10,000 F Quantity $10,000 F $10,500 U $10,500 F $ 4,500 U Variance Materials Mix & Yield Variance Materials Quantity Variance *. The material mix variance for a product is P500 unfavorable, and the material yield variance is P600 favorable. This means that the material (M) a. Price variance is P100 favorable. b. Quantity variance is P100 favorable. c. Price variance is unfavorable but the amount cannot be determined from the information given. d. Quantity variance is P1,100. RPCPA 1092 Materials Mix & Yield Variance Questions 1 & 2 are based on the following information. Pol Bobadilla Slim 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 Standard Mix Standard Cost per CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Pound Input: 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 1. The materials mix variance is (M) A. P280 unfavorable. B. P280 favorable.

C. P3,940 unfavorable. D. P3,940 favorable.

2. The materials yield variance is (M) A. P280 unfavorable. B. P280 favorable.

C. P3,940 unfavorable. D. P3,940 favorable.

Questions 22 and 23 are based on the following information. Gleim The information was presented as part of Question 5 on Part 4 of the June 1992 CMA examination. A company produces a gasoline additive. The standard costs and input for a 500-liter batch of the additive are presented below. Standard InputStandard Cost Total Chemical Quantity in Liters per Liter Cost Echol 200 $0.200 $ 40.00 Protex 100 0.425 42.50 Benz 250 0.150 37.50 Page 24 of 171

MANAGEMENT ADVISORY SERVICES CT-40

50 0.300 15.00 600 $135.00 The quantities purchased and used during the current period are shown below. A total of 140 batches were made during the current period. Quantity PurTotal Quantity Used Chemic chased (Liters) Purchase Price (Liters) al Echol 25,000 $ 5,365 26,600 Protex 13,000 6,240 12,880 Benz 40,000 5,840 37,800 CT-40 7,500 2,220 7,140 85,500 $ 19,665 84,420 60

. What is the materials mix variance for the operation? (M) a. $294 favorable. c. $94.50 unfavorable. b. $388.50 favorable. d. $219.50 favorable.

61

. What is the materials yield variance for this operation? (M) a. $294.50 favorable. c. $94.50 unfavorable. b. $388.50 favorable. d. $219.50 favorable.

Questions xx thru xx are based on the following information. H&M Harrigan Corporation uses two materials in the production of their product. The materials, A and B, have the following standards: Material Standard Mix Standard Unit Price Standard Cost A 3,500 units $1.00 per unit $3,500 B 1,500 units 3.00 per unit $4,500 Yield 4,000 units During January, the following actual production information was provided: Material Actual Mix A 30,000 units B 20,000 units Yield 36,000 units 62

. What is the materials mix variance? (M) a. $5,000 (F) c. $10,000 (F) b. $10,000 (U) d. $15,000 (F) CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 63

. What is the materials yield variance? (M) a. $4,000 (F) c. $8,000 (U) b. $8,000 (F) d. $9,000 (U)

64

. What is the materials usage variance? (M) a. $10,000 (U) c. $8,000 (F) b. $8,000 (U) d. $18,000 (U)

LABOR VARIANCES Standard DL Time per Unit 84. Hansen Company is a chemical manufacturer that supplies various products to industrial users. The company plans to introduce a new chemical solution called Bysap, for which it needs to develop a standard product cost. The following labor information is available on the production of Bysap.  The product, which is bottled in 10-liter containers, is primarily a mixture of Byclyn, Salex, and Protex.  The finished product is highly unstable, and one 10-liter batch out of six if rejected at final inspection. Rejected batches have no commercial value and are thrown out.  It takes a worker 35 minutes to process one 10-liter batch of Bysap. Employees work eight hours a day, including one hour per day for rest breaks and cleanups. What is the standard labor time to produce one 10-liter batch of Bysap? A. 35 minutes. C. 48 minutes. B. 40 minutes. D. 45 minutes. Pol Bobadilla Standard DL Cost per Unit 65 . The following direct labor information pertains to the manufacture of product Glu: Time required to make one unit 2 direct labor hours Number of direct workers 50 Number of productive hours per week, per worker 40 Weekly wages per worker $500 Workers’ benefits treated as direct labor costs 20% of wages What is the standard direct labor cost per unit of product Glu? (M) Page 25 of 171

MANAGEMENT ADVISORY SERVICES a. $30. b. $24.

STANDARD COSTS AND VARIANCE ANALYSIS c. $15. d. $12.

67

AICPA 0592 II-46

*. Each unit of Product 8 in 1 requires two direct labor hours. Employee benefit costs are treated as direct labor costs. Data on direct labor are as follows: Number of direct employees 25 Weekly productive hours per employee 30 Estimated weekly wages per employee $240 Employee benefits (related to weekly wages) 25% The standard direct labor cost per unit of Product 8in1 is: (M) A. $8.00 C. $12.00 B. $10.00 D. $20.00 CMA adapted 66

. Media Co. manufactures televisions. The following direct labor information relates to the manufacture of televisions. Number of workers 60 Number of productive hours per week, per worker 40 Hours required to make 1 unit 3 Weekly wages per worker $600 Employee benefits treated as direct labor costs 20% of wages What is the standard direct labor cost per unit? (M) A. $54 C. $30 B. $36 D. $18 Gleim

62. The following direct labor information pertains to the manufacturer of Part SARS: Number of hours required to make a part 2.5 DLH Number of direct workers 75 Number of total productive hours per week 3,000 Weekly wages per worker P1,000 Laborer’s fringe benefits treated as direct labor costs 25% of wages What is the standard direct labor cost per unit of Parts SARS? (M) A. P62.500 C. P41.670 B. P78.125 D. P84.125 Pol Bobadilla

CMA EXAMINATION QUESTIONS

. Each unit of Product XK-46 requires three direct labor hours. Employee benefit costs are treated as direct labor costs. Data on direct labor are Number of direct employees 25 Weekly productive hours per employee 35 Estimated weekly wages per employee $245 Employee benefits (related to weekly wages) 25% The standard direct labor cost per unit of Product XK-46 is (M) A. $21.00. C. $29.40. B. $26.25. D. $36.75. CMA 0684 4-26

Standard DLH Allowed 28. Hart Company's labor standards call for 500 direct labor hours to produce 250 units of product. During October the company worked 625 direct labor hours and produced 300 units. The standard hours allowed for October would be: (E) a. 625 hours. c. 600 hours. b. 500 hours. d. 250 hours. G & N 9e Total DL Variance 68 . The following is a standard cost variance analysis report on direct labor cost for a division of a manufacturing company. Job Actual Hours at Actual Hours at Standard Hours Actual Wages Standard Wages at Standard Wages 213 $3,243 $3,700 $3,100 215 15,345 15,675 15,000 217 6,754 7,000 6,600 219 19,788 18,755 19,250 221 3,370 3,470 2,650 Totals $48,500 $48,600 $46,600 What is the total flexible budget direct labor variance for the division? (M) a. $1,00 unfavorable. c. $1,900 favorable. b. $1,900 unfavorable. d. $2,000 unfavorable. CIA 0592 IV18

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MANAGEMENT ADVISORY SERVICES Labor Rate Variance Given 69 . Smith 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 $10.00 Actual direct labor rate per hour $9.00 Labor rate variance $12,000 favorable Actual output 2,000 units Standard hours allowed for actual production 10,000 hours What is the total labor budget variance for Smith Company? (D) a. $12,000(F) d. $8,000(U) b. $8,000(F) e. $20,000(U) c. $12,000(U) H&M DL Rate Variance *. Below are FLX Corporation’s standard costs to produce one concrete table: Direct raw 2 kgs. P375 per kg. materials Direct labor 30 minutes P31.25 per hour In September, FLX produced 250 concrete tables. 520 kgs. of raw materials were used at a total cost of P193,440. A total of 128 direct labor hours were used at a cost of P4,096. The direct labor rate variance is (E) a. P22.50 c. P64.75 b. P93.00 d. P96.00 RPCPA 1097 .

STANDARD COSTS AND VARIANCE ANALYSIS 42. Genco paid $78,800 to direct labor for the production of 1,500 units. Standards allow 2 labor hours per unit at a rate of $25.00 per hour. Actual hours totaled 2,900. The direct labor rate variance was (E) a. $2,050 favorable c. $6,300 unfavorable b. $3,800 favorable d. some other number L & H 10e 46. Chippewa paid $32,225 to direct labor for the production of 1,700 units. Standards allow 3 labor hours per unit at a rate of $6.50 per hour. Actual hours totaled 5,150. The direct labor rate variance was (E) a. $1,250 favorable. c. $325 favorable. b. $925 favorable. d. $325 unfavorable. D, L & H 9e 70

. One of the items produced by a manufacturer of lawn and garden tools is a chain saw. The direct labor standard for assembling and testing a chain saw is 2.5 hours at $8 per hour. Budgeted production for October was 1,200 units. Actual production during the month was 1,000 units, and direct labor cost was $27,840 for 3,200 hours. Using a two-variance system, what was the direct labor price (rate) variance for October? (E) A. $2,240 favorable. C. $3,840 favorable. B. $2,240 unfavorable. D. $5,600 unfavorable. CIA 1189 IV17

71

. The standard direct labor cost to produce one pound of output for a company is presented below. Related data regarding the planned and actual production activities for the current month for the company are also given below: NOTE: DLH = Direct labor hours Direct labor standard: 0.4 DLH @ $12.00 per DLH = $4.80 Planned production 15,000 pounds Actual production 15,500 pounds Actual direct labor costs (6,250 DLH) $75,250 The company's direct labor rate variance for the current month is (E) A. $10 unfavorable. C. $248 unfavorable. B. $240 unfavorable. D. $250 unfavorable. CIA 0597 III-89

JKL Company is using a direct labor cost standard of 4 hours and a P12 wage rate per hour for one of its products. Planned production was 300 units, but actual production was 250 units, using for each unit 3 labor hours at a P13 wage rate. What is the labor price variance? (E) A. P750 unfavorable. C. P1,200 favorable. B. P900 unfavorable. D. P750 favorable. RPCPA 1001

42. Genco paid $39,400 to direct labor for the production of 1,500 units. Standards allow 2 labor hours per unit at a rate of $12.50 per hour. Actual hours totaled 2,900. The direct labor rate variance was (E) a. $1,250 favorable. c. $3,150 unfavorable. b. $3,150 favorable. d. $1,900 unfavorable. D, L & H 9e CMA EXAMINATION QUESTIONS

.

Blasto Company produces bug-bombs. Direct labor standards for the firm and actual data for the month of April are shown below: Page 27 of 171

MANAGEMENT ADVISORY SERVICES Standard labor rate per hour Standard hours allowed per bug-bomb Actual bug-bombs produced in April Actual labor costs for April Actual labor hours recorded for April Blasto’s labor rate variance for April was (E) A. $640 unfavorable. C. $560 unfavorable. B. $600 favorable. D. $500 favorable. Diamond

STANDARD COSTS AND VARIANCE ANALYSIS $6 0.05 50,000 $17,400 3,000 Flamholtz &

48. The following labor standards have been established for a particular product: Standard labor hours per unit of output 1.7 hours Standard labor rate $14.05 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 3,700 hours Actual total labor cost $50,690 Actual output 2,300 units What is the labor rate variance for the month? (E) a. $1,295 F c. $4,246 F b. $2,877 F d. $4,246 U G & N 9e 91. The following labor standards have been established for a particular product: Standard labor hours per unit of output .. 7.5 hours Standard labor rate ...................... $15.25 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked ...................... 9,600 hours Actual total labor cost .................. $144,480 Actual output ............................ 1,200 units What is the labor rate variance for the month? (E) a. $1,920 F c. $1,920 U b. $240 U d. $240 F G & N 9e

CMA EXAMINATION QUESTIONS

83. The following labor standards have been established for a particular product: Standard labor hours per unit of output 8.1 hours Standard labor rate $14.40 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 8,700 hours Actual total labor cost $129,195 Actual output 1,000 units What is the labor rate variance for the month? (E) A. $450 F C. $3,915 U B. $3,915 F D. $450 U G & N 10e 47. The following labor standards have been established for a particular product: Standard labor hours per unit of output 9.0 hours Standard labor rate $15.10 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 8,100 hours Actual total labor cost $119,880 Actual output 800 units What is the labor rate variance for the month? (E) A. $11,160 F C. $11,160 U B. $13,320 U D. $2,430 F G & N 10e 85. The following labor standards have been established for a particular product: Standard labor hours per unit of output 9.8 hours Standard labor rate $16.40 per hour The following data pertain to operations concerning the product for the last month:

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MANAGEMENT ADVISORY SERVICES Actual hours worked Actual total labor cost Actual output What is the labor rate variance for the month? (E) A. $140 U C. $140 F B. $1,580 U D. $1,580 F

STANDARD COSTS AND VARIANCE ANALYSIS 7,900 hours $127,980 700 units G & N 10e

33. Operational statistics generated for the period just ended for APEX Manufacturing Co., maker of a line of furniture, follow: Standards per set: Materials 2.0 yards @ P100 Direct labor 0.5 hour @ P200 Actual results: Production 20,000 sets Materials used 37,000 yards Price per yard P102 Direct labor hours used 9,000 hours Direct labor cost P1,764,000 The direct labor rate variance was (E) a. P36,000 favorable c. P40,000 favorable b. P36,000 unfavorable d. P40,000 unfavorable RPCPA 1094 72

. The flexible budget for the month of May 1993 was for 9,000 units at a direct materials cost of $15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of $81,000. Actual output for the month was 8,500 units with $127,500 indirect materials and $77,775 in direct labor expense. The direct labor standard of 45 minutes was maintained throughout the month. Variance analysis of the performance for the month of May would show a(n) (E) a. Favorable materials usage variance of $7,500. b. Favorable direct labor efficiency variance of $1,275. c. Unfavorable direct labor efficiency variance of $1,275. d. Unfavorable direct labor price variance of $1,275. CMA 0693 3-15

Standard direct labor rate per hour $10.00 Actual direct labor rate per hour $9.00 Labor rate variance $12,000 favorable Actual output 2,000 units Standard hours allowed for actual production 10,000 hours How many actual labor hours were worked during March for Smith Company? (D) a. 10,000 d. 12,000 b. 2,000 e. 1,000 c. 1,200 H&M 87. The auto repair shop of Empire Motor Sales uses standards to control labor time and labor cost in the shop. The standard time for a motor tune-up is 2.5 hours. The record showing time spent in the shop last week on tune-ups has been misplaced; however, the shop supervisor recalls that 50 tune-ups were completed during the week and the controller recalls that the labor rate variance on tune-ups was $87, favorable. The shop has a set standard labor rate of $9 per hour for tune-up work. The total labor variance for the week on tune-up work was $93, unfavorable. The number of actual hours spent on tune-up work last week was: (M) A. 125 hours. B. 105 hours. C. 145 hours. D. Cannot be computed without further information. G & N 10e Actual Direct Labor Rate 52. The Reedy Company uses a standard costing system. The following data are available for November: Actual direct labor hours worked 5,800 hours Standard direct labor rate $9 per hour Labor rate variance $1,160 favorable The actual direct labor rate for November is: (M) a. $8.80. c. $9.00. b. $8.90. d. $9.20. G & N 9e

Actual Direct Labor Hours 73 . Smith Company uses a standard cost system. The following information pertains to direct labor costs for the month of June. CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES 51. The Hanson Company employs a standard costing system. The following data are available for February: Actual direct labor hours worked 6,500 Standard direct labor rate $8 per hour Labor rate variance $2,600 favorable The actual direct labor rate for February is: (M) A. $7.60. C. $8.00. B. $8.40. D. $2.50. G & N 10e 74

. During October, 14,000 direct labor hours were worked at a standard cost of $40 per hour. If the direct labor rate variance for October was $70,000 favorable, the actual cost per direct labor hour must be (M) a. $35 c. $45 b. $40 d. $50 H&M

75

. During October, 20,000 direct labor hours were worked at a standard cost of $5 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be (M) a. $5.20 c. $4.80 b. $5.00 d. $4.60 H&M

88. The auto repair shop of Empire Motor Sales uses standards to control labor time and labor cost in the shop. The standard time for a motor tune-up is 2.5 hours. The record showing time spent in the shop last week on tune-ups has been misplaced; however, the shop supervisor recalls that 50 tune-ups were completed during the week and the controller recalls that the labor rate variance on tune-ups was $87, favorable. The shop has a set standard labor rate of $9 per hour for tune-up work. The total labor variance for the week on tune-up work was $93, unfavorable. The actual hourly rate of pay for tune-up work last week was: (M) A. $8.40 per hour. B. $9.00 per hour. C. $9.60 per hour. D. Cannot be computed without further information. G & N 10e

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Actual Direct Labor Cost 76 . Sullivan Corporation’s direct labor costs for the month of March were as follows: Standard direct labor hours 42,000 Actual direct labor hours 40,000 Direct labor rate variance – favorable $8,400 Standard direct labor rate per hour $6.30 What was Sullivan’s total direct labor payroll for the month of March? (E) a. $243,600 c. $264,600 b. $252,000 d. $260,400 AICPA 1180 I-35 77

. Daniel Corporation's direct labor costs for June were as follows: Actual direct labor hours Standard direct labor hours Direct labor rate variance – favorable Standard direct labor rate per hour Compute Daniel's total direct labor payroll for the month of June. A. $154,560 C. $167,680 B. $154,880 D. $168,000

32,000 33,600 $6,720 $5.04 (E) Gleim

*. The following information related to the direct labor costs of Valley Mfg. Co., for the month of April 19x9: Actual direct labor hours 57,000 hours Standard direct labor hours 58,000 hours Direct labor rate variance – favourable P8,550 Standard direct labor rate per hour P5.50 What was the total direct labor payroll of Valley Mfg. for the month of April 19x9? (E) a. P310,300 c. P319,000 b. P322,050 d. P304,950 RPCPA 1089

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Standard Direct Labor Rate 78 . Information on ABC Company’s direct labor costs for the month of August is as follows: Actual direct labor rate P7.50 Standard direct labor hours allowed 11,000 Actual direct labor hours 10,000 Direct labor price variance – unfavorable P5,000 The standard direct labor rate in January was (M) a. P8,05 c. P7.00 b. P6.95 d. P8.00 RPCPA 1001 79

. Information on Hanley’s direct labor costs for the month of January is as follows: Actual direct labor rate $7.50 Standard direct labor hours allowed 11,000 Actual direct labor hours 10,000 Direct labor rate variance – favorable $5,500 The standard direct labor rate in January was (M) a. $6.95 c. $8.00 b. $7.00 d. $8.05 AICPA 0582 I-25

80

. Lake's direct labor costs for the month of May are as follows: Standard direct labor hours allowed Actual direct labor rate Actual direct labor hours Direct labor rate variance – favorable What was Lake's standard direct labor rate in May? (M) A. $7.69 C. $8.25 B. $7.80 D. $8.81

12,500 $8.25 10,000 $5,600 Gleim

DL Efficiency Variance *. Alice & Co. has this selected information: standard direct labor hours of 2,000 at P7.00/hour and actual labor hours worked are 2,400 at an actual rate of P7.60/hour. The labor efficiency variance is (E) a. P1,400 c. P2,800 b. P2,400 d. none of these RPCPA 1087 CMA EXAMINATION QUESTIONS

43. DIGITAL Products produces a product, Digit, and uses standard costing methods. The standard direct labor cost of Digit is one and one-half hours at P180 per hour. During October, 19x7, 500 Digit units were produced in 1,000 hours at P176 per hour. The direct labor efficiency variance is a favorable (an unfavorable) (E) a. P30,000 c. P(30,000) b. P45,000 d. P(45,000) RPCPA 1097 45. Palo Corp. manufactures one product with a standard direct labor cost of 2 hours at $6.00 per hour. During March, 500 units were produced using 1,050 hours at $6.10 per hour. The unfavorable direct labor efficiency variance is: A. $100. C. $300. B. $105. D. $305. G & N 10e 81

. The direct labor standards for producing a unit of a product are two hours at $10 per hour. Budgeted production was 1,000 units. Actual production was 900 units, and direct labor cost was $19,000 for 2,000 direct labor hours. The direct labor efficiency variance was: (E) A. $1,000 favorable C. $2,000 favorable B. $1,000 unfavorable D. $2,000 unfavorable CIA adapted

82

. Bell Co. manufactures a single product with a standard direct labor cost of 2 hours at $10.00 per hour. During November, 1,500 units were produced requiring 3,200 hours at $10.25 per hour. What was the unfavorable direct labor efficiency variance? (E) A. $2,050 C. $1,250 B. $2,000 D. $1,200 Gleim

83

. Yola Co. manufactures one product with a standard labor cost of 4 hours at $12.00 per hour. During June 1,000 units were produced using 4,100 hours at $12.20 per hour. The unfavorable direct labor efficiency variance was (E) a. $1,220 c. $820 b. $1,200 d. $400 AICPA 1192 II-21

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MANAGEMENT ADVISORY SERVICES .

STANDARD COSTS AND VARIANCE ANALYSIS

Genco paid $39,400 to direct labor for the production of 1,500 units. Standards allow 2 labor hours per unit at a rate of $12.50 per hour. Actual hours totaled 2,900. The direct labor efficiency variance was (E) a. $1,250 favorable. c. $3,150 unfavorable. b. $3,150 favorable. d. $1,900 unfavorable. D, L & H 9e

actual production activities for the current month for the company are also given below: NOTE: DLH = Direct labor hours Direct labor standard: 0.4 DLH @ $12.00 per DLH = $4.80 Planned production 15,000 pounds Actual production 15,500 pounds Actual direct labor costs (6,250 DLH) $75,250 The company's direct labor efficiency variance for the current month is (E) A. $600 unfavorable. C. $2,400 unfavorable. B. $602 unfavorable. D. $3,000 unfavorable. CIA 0597 III90

43. Genco paid $78,800 to direct labor for the production of 1,500 units. Standards allow 2 labor hours per unit at a rate of $25.00 per hour. Actual hours totaled 2,900. The direct labor efficiency variance was (E) a. $2,500 favorable c. $6,300 unfavorable b. $3,800 favorable d. some other number L & H 10e 47. Chippewa paid $32,225 to direct labor for the production of 1,700 units. Standards allow 3 labor hours per unit at a rate of $6.50 per hour. Actual hours totaled 5,150. The direct labor efficiency variance was (E) a. $1,250 favorable. c. $325 favorable. b. $925 favorable. d. $325 unfavorable. D, L & H 9e 46. Yola Company manufactures a product with standards for direct labor of 4 direct labor-hours per unit at a cost of $12.00 per direct labor-hour. During June, 1,000 units were produced using 4,100 hours at $12.20 per hour. The direct labor efficiency variance was: (E) a. $1,200 favorable. c. $2,020 favorable. b. $1,200 unfavorable. d. $2,020 unfavorable. AICPA adapted 84

85

. One of the items produced by a manufacturer of lawn and garden tools is a chain saw. The direct labor standard for assembling and testing a chain saw is 2.5 hours at $8 per hour. Budgeted production for October was 1,200 units. Actual production during the month was 1,000 units, and direct labor cost was $27,840 for 3,200 hours. Using a two-variance system, what is the direct labor efficiency variance? (E) A. $2,240 unfavorable. C. $5,600 unfavorable. B. $5,600 favorable. D. $6,090 favorable. CIA 1189 IV-18 . The standard direct labor cost to produce one pound of output for a company is presented below. Related data regarding the planned and

CMA EXAMINATION QUESTIONS

86

. The total budgeted direct labor cost of a company for the month was set at $75,000 when 5,000 units were planned to be produced. The following standard cost, stated in terms of direct labor hours (DLH), was used to develop the budget for direct labor cost: 1.25 DLH x $12.00/DLH = $15.00/unit produced The actual operating results for the month were as follows: Actual units produced 5,200 Actual direct labor hours worked 6,600 Actual direct labor cost $77,220 The direct labor efficiency variance for the month would be (E) A. $4,200 unfavorable. C. $2,220 unfavorable. B. $3,000 unfavorable. D. $1,200 unfavorable. CIA 1191 IV15

50. Cameron Company has standard variable costs as follows: Materials, 3 pounds at $4.00 per pound Labor, 2 hours at $10.00 per hour Variable overhead, $7.50 per labor hour

$12.00 20.00 15.00 $47.00 During September, Chetek produced 5,000 units, using 9,640 labor hours at a total wage of $94,670 and incurring $78,600 in variable overhead. The direct labor efficiency variance is (E) a. $1,730 favorable. c. $3,600 favorable. b. $2,700 favorable. d. $5.330 favorable. D, L & H 9e Page 32 of 171

MANAGEMENT ADVISORY SERVICES .

87

Blasto Company produces bug-bombs. Direct labor standards for the firm and actual data for the month of April are shown below: Standard labor rate per hour $6 Standard hours allowed per bug-bomb 0.05 Actual bug-bombs produced in April 50,000 Actual labor costs for April $17,400 Actual labor hours recorded for April 3,000 Blasto’s labor efficiency variance for April was (E) A. $2,900 unfavorable. C. $3,000 favorable. B. $2,820 favorable. D. $3,000 unfavorable. Flamholtz & Diamond . A manager prepared the following table by which to analyze labor costs for the month: Actual Hours at Actual Rate $10,000 Actual Hours at Standard Rate $9.800 Standard Hours at Standard Rate $8,820 What variance was $980? (E) A. Labor efficiency variance. C. Volume variance. B. Labor rate variance. D. Labor spending variance. CIA 0590 IV-15

16. A product requires 0.60 standard labor hours, the actual labor rate is $10 per hour, and production was 300 units. Actual labor cost was $1,862 at $9.80. Which of the following is true? (E) a. The labor rate variance was $98 favorable. b. The labor rate variance was $62 unfavorable. c. The labor efficiency variance was $62 unfavorable. d. The labor efficiency variance was $100 unfavorable. D, L & H 9e 92. The following labor standards have been established for a particular product: Standard labor hours per unit of output .. 7.5 hours Standard labor rate ...................... $15.25 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked ...................... 9,600 hours CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Actual total labor cost .................. Actual output ............................ What is the labor efficiency variance for the month? (E) a. $7,230 U c. $7,230 F b. $9,030 U d. $9,150 U

$144,480 1,200 units G & N 9e

84. The following labor standards have been established for a particular product: Standard labor hours per unit of output 8.1 hours Standard labor rate $14.40 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 8,700 hours Actual total labor cost $129,195 Actual output 1,000 units What is the labor efficiency variance for the month? A. $8,910 U C. $12,555 U B. $12,555 F D. $8,640 U G & N 10e 47. The following labor standards have been established for a particular product: Standard labor hours per unit of output .. 8.3 hours Standard labor rate ...................... $12.10 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked ...................... 6,100 hours Actual total labor cost .................. $71,370 Actual output ............................ 900 units What is the labor efficiency variance for the month? (E) a. $19,017 F c. $16,029 F b. $19,017 U d. $16,577 F G & N 9e

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46. The following labor standards have been established for a particular product: Standard labor hours per unit of output 8.7 hours Standard labor rate $18.10 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 3,800 hours Actual total labor cost $67,640 Actual output 500 units What is the labor efficiency variance for the month? (E) A. $9,790 F C. $9,955 F B. $11,095 U D. $11,095 F G & N 10e 86. The following labor standards have been established for a particular product: Standard labor hours per unit of output 9.8 hours Standard labor rate $16.40 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 7,900 hours Actual total labor cost $127,980 Actual output 700 units What is the labor efficiency variance for the month? A. $17,056 U C. $15,476 F B. $15,476 U D. $16,848 U G & N 10e Actual Hours Worked 50. The standards for direct labor for a product are 2.5 hours at $8 per hour. Last month, 9,000 units of the product were made and the labor efficiency variance was $8,000 F. The actual number of hours worked during the past period was: (M) a. 23,500. c. 20,500. b. 22,500. d. 21,500. G & N 9e 48. BINGO Co. uses a standard cost system. month of May, 19x7 follows: Actual rate per hour CMA EXAMINATION QUESTIONS

Direct labor statistics for the P152.50

Standard rate per hour Labor efficiency variance – unfavorable Standard hours allowed for actual production What was the actual number of hours worked? (M) a. 35,700 c. 37,000 b. 36,700 d. 37,600

P150.00 P15,000 37,500 RPCPA 0597

66. Rainbow Company uses a standard cost system. Information about its direct labor costs for Product Lux for the month of January follows: Standard hours allowed for actual production 1,500 Actual hourly rate paid P61.00 Standard hourly rate P60.00 Labor efficiency variance – favorable P6,000 How many direct labor hours were actually worked during the month of January? (M) A. 1,400 C. 1,498 B. 1,402 D. 1,600 Pol Bobadilla 88

. Tub Co. uses a standard cost system. The following information pertains to direct labor for product B for the month of October: Standard hours allowed for actual production 2,000 Actual rate paid per hour $8.40 Standard rate per hour $8.00 Labor efficiency variance $1,600 U What were the actual hours worked? (M) a. 1,800 c. 2,190 b. 1,810 d. 2,200 AICPA 1186 II-21

89

. Bolt Co. uses a standard-cost system. Bolt's direct labor information for July is as follows: Standard hours allowed for actual production 3,000 Actual rate paid per hour $9.35 Standard rate per hour $8.50 Labor efficiency variance $1,870 U The actual hours worked equaled (M) A. 2,780 C. 3,200 B. 2,800 D. 3,220 Gleim Page 34 of 171

MANAGEMENT ADVISORY SERVICES 20. Information on Ulan Company’s direct labor costs is as follows: Standard direct labor rate P7.50 Actual direct labor rate P7.00 Standard direct labor hours 20,000 Direct labor usage variance – unfavorable P8,400 What were the actual hours worked, rounded to the nearest hour? (M) a. 21,914 c. 21,120 B. 20,714 d. 21,200 Pol Bobadilla 90

. Information on Orman Company's direct labor costs is as follows: Standard direct labor rate $3.75 Actual direct labor rate $3.50 Standard direct labor hours 10,000 Direct labor usage (efficiency) variance—unfavorable $ 4,200 What were the actual hours worked, rounded to the nearest hour? A. 11,914 C. 11,120 B. 10,714 D. 11,200 Carter & Usry

49. Lab Corp. uses a standard cost system. Direct labor information for Product CER for the month of October follows: Standard direct labor rate $6.00 per hour Actual direct labor rate paid $6.10 per hour Standard hours allowed for actual production 1,500 hours Labor efficiency variance--unfavorable $600 What are the actual hours worked? (M) a. 1,400. c. 1,598. b. 1,402. d. 1,600. AICPA adapted

STANDARD COSTS AND VARIANCE ANALYSIS 50. Harper Company uses a standard cost system. Data relating to direct labor for the month of August follows: Direct labor efficiency variance—favorable $5,250 Standard direct labor rate $7.00 Actual direct labor rate $7.50 Standard hours allowed for actual production 9,000 What are the actual hours worked for the month of August? (M) A. 9,750 C. 8,300 B. 8,400 D. 8,250 G & N 10e Standard Hours Allowed 48. The Fischer Company uses a standard costing system. For the month of December, the following data have been assembled: Actual direct labor hours worked 5,800 hours Standard direct labor rate $9 per hour Labor efficiency variance $1,800 unfavorable The standard hours allowed for December production is: (M) A. 5,400 hours. C. 5,800 hours. B. 5,600 hours. D. 6,000 hours. G & N 10e 28. ACE 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 (M) a. P52,500 c. P62,500 b. P60,000 d. P70,000 RPCPA 1094 9. The Taxi Corporation makes a variety of leather goods. It uses standard 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

CMA EXAMINATION QUESTIONS

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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? (D) A. 50,250 C. 48,550 B. 58,625 D. 37,520 Pol Bobadilla DL Rate Variance 54. Borden Enterprises uses standard costing. For the month of April, the company reported the following data: Standard direct labor rate: $10 per hour Standard hours allowed for actual production: 8,000 Actual direct labor rate: $9.50 per hour Labor efficiency variance: $4,800 F The labor rate variance for April is: (M) a. $3,760 U. c. $2,850 F. b. $3,760 F. d. $2,850 U. G & N 9e 66. Rainbow Company uses a standard cost system. Information about its direct labor costs for Product Lux for the month of January follows: Standard hours allowed for actual production 1,500 Actual hourly rate paid P61.00 Standard hourly rate P60.00 Labor efficiency variance – favorable P6,000 How much was the direct labor rate variance? (M) A. 1,400 F C. 1,400 U B. 1,600 F D. 1,600 U Pol Bobadilla 91

. Pane Company's direct labor costs for April are as follows: Standard direct labor hours Actual direct labor hours Total direct labor payroll Direct labor efficiency variance – favorable What is Pane's direct labor rate variance? (D) A. $44,496 unfavorable. C. $49,440 favorable.

CMA EXAMINATION QUESTIONS

42,000 41,200 $247,200 $3,840

B. $49,440 unfavorable.

D. $50,400 favorable.

Gleim

DL Rate & Efficiency Variance - Given Actual Cost 51. In a certain standard costing system the following results occurred last period: labor rate variance, $1,080 F; labor efficiency variance, $780 U, actual hours worked 675, standard hours allowed 600. Actual labor cost was: (D) a. c. $5,940 b. . d. Barfield 4e Actual Hours 37. Acme Company produced 500 units with a $50 unfavorable labor rate variance. The labor use variance was $180 favorable. Actual labor cost was $17,870. The standard wage rate was $9. Actual hours were (M) a. 1,520 c. 2,000 b. 1,980 d. 2,020 D, L & H 9e 51. In a certain standard costing system the following results occurred last period: labor rate variance, $1,000 U; labor efficiency variance, $2,800 F; and the actual labor rate was $0.20 more per hour than the standard labor rate. The number of actual direct labor hours used last period was: (D) a. 9,000. c. 5,000. b. 5,400. d. 4,800. G & N 9e Actual Wage Rate 45. Jeter’s Company had a $510 unfavorable direct labor rate variance and a $1,000 favorable efficiency variance. Jeter’s standard payroll was $11,200 at a standard wage of $10 per hour. What was the actual direct labor wage rate? (M) a. $9.56 c. $10.50 b. $10.00 d. Some other number. D, L & H 9e 44. SUPERIOR Mfg. Co., using a standard cost system, furnished information on direct labor cost as follows: Standard direct labor hours 75,000 Actual direct labor hours 72,500 Page 36 of 171

MANAGEMENT ADVISORY SERVICES Total payroll Unfavorable rate variance Favorable efficiency variance What was SUPERIOR’s actual direct labor rate per hour? (E) a. P3.80 c. P4.20 b. P4.00 d. P4.25

STANDARD COSTS AND VARIANCE ANALYSIS P275,500 14,500 10,000 RPCPA 1097

Standard Hours 19. A company made 1,200 units with a $550 favorable labor use variance. There was no labor rate variance and actual labor cost was $19,250. The actual wage rate was $11. Standard labor time per unit is (M) a. 0.5 hours. c. 1.5 hours. b. 1.0 hour d. 2.0 hours. D, L & H 9e Standard Direct Labor Rate 44. Danner had a $550 favorable direct labor rate variance and a $720 unfavorable efficiency variance. Danner paid $6,650 for 800 hours of labor. What was the standard direct labor wage rate? (M) a. $8.10 c. $9.00 b. $8.31 d. Some other number. D, L & H 9e 51. In a certain standard costing system the following results occurred last period: labor rate variance, $1,080 F; labor efficiency variance, $780 U, actual hours worked 675, standard hours allowed 600. Standard direct labor rate per hour was: (D) a. c. $10.40 b. . d. Barfield 4e 53. For the month of April, Thorp Co.'s records disclosed the following data relating to direct labor: Actual cost $10,000 Rate variance $ 1,000 favorable Efficiency variance $ 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: (M) a. $5.50. c. $4.75. b. $5.00. d. $4.50. AICPA adapted CMA EXAMINATION QUESTIONS

51. X’OR Co. uses a standard cost system, and data for its direct labor costs are summarized below: Actual direct labor hours 72,500 Standard direct labor hours 75,000 Total direct labor payroll P275,500 Direct labor rate variance – favorable 14,500 Direct labor efficiency variance - favorable 10,000 The standard direct labor rate per hour is (M) a. P3.60 c. P4.00 b. P3.80 d. P4.20 RPCPA 1096 Rate Variance & Budget Variance Actual Direct Labor Rate 31. TAMARAW, Inc. has a maintenance shop where repairs to its motor vehicles are done. During last month’s labor strike, certain records were lost. The actual input of direct labor hours was 1,000, and the resulting direct labor budget variance was a favorable P3,400. The standard direct labor rate was P28.00 per hour, but an unexpected labor shortage necessitated the hiring of higher-paid workers for some jobs and had resulted in a rate variance of P800. The actual direct labor rate was (M) a. P27.20 per hour c. P30.25 per hour b. P28.80 per hour d. P31.40 per hour RPCPA 0595 II-3 DL Mix and Yield Variance Questions 54 and 55 are based on the following information. Gleim Landeau Manufacturing Company has a process cost accounting system. A monthly analysis compares actual results with both a monthly plan and a flexible budget. Standard direct labor rates used in the flexible budget are established at the time the annual plan is formulated and held constant for the entire year. Standard direct labor rates in effect for the fiscal year ending June 30 and standard hours allowed for the output in April are Standard DL Rate per Standard DLH Allowed for Hour Output Labor class $8.00 500 III Labor class II 7.00 500 Page 37 of 171

MANAGEMENT ADVISORY SERVICES Labor class I 5.00 500 The wage rates for each labor class increased on January 1 under the terms of a new union contract negotiated in December of the previous fiscal year. The standard wage rates were not revised to reflect the new contract. The actual direct labor hours (DLH) worked and the actual direct labor rates per hour experienced for the month of April were as follows: Actual Direct Labor Actual Rate per Hour Direct Labor Hours Labor class III $8.50 550 Labor class II 7.50 650 Labor class I 5.40 375 92

. What is the labor yield variance for Landeau in April (rounded)? (M) A. $500 unfavorable. C. $825 favorable. B. $750 unfavorable. D. $1,500 favorable.

93

. What is the labor mix variance for Landeau in April? (M) A. $325.00 unfavorable. C. $180.00 favorable. B. $66.67 unfavorable. D. $50.00 favorable.

STANDARD COSTS AND VARIANCE ANALYSIS Questions 56 through 58 are based on the following information. Gleim The information was presented as part of Question 4 on Part 4 of June 1978 CMA exam. A company’s standard direct labor rates in effect for the fiscal year ending June 30 and standard hours allowed for the output in April are Standard DL Standard DLH Rate per Hour Allowed for Output Labor class III $8.00 500 Labor class II 7.00 500 Labor class I 5.00 500 The wage rates for each labor class increased on January 1, under the terms of a new union contract. The standard wage rates were not revised. The actual direct labor hours (DLH) and the actual direct labor rates for April were as follows: Actual Rate Actual DLH Labor class III $8.50 550 Labor class II 7.50 650 Labor class I 5.40 375 94

. What is the labor yield variance (rounded)? (M) a. $500 c. $820 b. $320 d. $515

95

. What is the labor mix variance (rounded)? (M) a. $50.00 c. $66.67 b. $320.00 d. $500.00

96

. The labor mix and labor yield variances together equal the (E) a. Total labor variance. b. Labor rate variance. c. Labor efficiency variance. d. Sum of the labor efficiency and overhead efficiency variances.

CMA EXAMINATION QUESTIONS

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STANDARD COSTS AND VARIANCE ANALYSIS

Questions 1 thru 3 are based on the following information. H&M Harrigan Corporation uses two different types of labor to manufacture its product. The types of labor, Mixing and Finishing, have the following standards: Labor Type Standard Standard Unit Price Standard Mix Cost Mixing 500 hours $10.00 per unit $5,000 Finishing 250 hours 5.00 per unit $1,250 Yield 4,000 units During January, the following actual production information was provided: Labor Type Actual Mix Mixing 4,500 units Finishing 3,000 units Yield 36,000 units

The nursing unit on the fourth floor treats patients with four DRG classifications. The unit is staffed with registered nurses (RNs), licensed practical nurses (LPNs), and aides. The standard nursing hours and salary rates and actual numbers of patients for the month of May were as follows. DRG Actual Standard Hours per Total Standard Hours Classificat No. DRG ion of RN LPN Aide RN LPN Aide Patients 1 250 6 4 5 1,500 1,000 1,250 2 90 26 16 10 2,340 1,440 900 3 240 10 5 4 2,400 1,200 960 4 140 12 7 10 1,680 980 1,400 7,920 4,620 4,510

97

Standard Hourly Rates RN $12.00 LPN 8.00 Aide 6.00 The results of operations during May for the fourth floor nursing unit are presented below: RN LPN Aide Actual hours 8,150 4,300 4,400 Actual salary $100,245 $35,260 $25,300 Actual hourly $12.30 $8.20 $5.75 rate Because MVH does not have data to calculate variances by DRG, it uses a flexible budgeting approach to calculate labor variances for each reporting period by labor classification (RN, LPN, Aide). Labor mix and labor yield variances are also calculated because one labor input can be substituted for another. The variances are used by nursing supervisors and hospital administration to evaluate the performance of nurses.

. What is the labor mix variance? a. $2,500 (F) b. $5,000 (U)

c. $5,000 (F) d. $2,500 (U)

98

. What is the labor yield variance? a. $6,250 (F) b. $4,000 (F)

c. $6,250 (U) d. $4,000 (U)

99

. What is the labor efficiency variance? a. $2,500 (F) c. $3,750 (F) b. $6,250 (U) d. $3,750 (U)

Questions 59 through 61 are based on the following information. Gleim Mountain View Hospital (MVH) has adopted a standard cost accounting system for evaluation and control of nursing labor. Diagnosis Related Groups (DRGs), instituted by the U.S. government for health insurance reimbursement, are used as the output measure in the standard cost system. A DRG is a patient classification scheme in which hospitals are regarded as multiproduct firms with inpatient treatment procedures related to the numbers and types of patient ailments treated. MVH has developed standard nursing times for the treatment of each DRG classification, and nursing labor hours are assumed to vary with the number of DRGs treated within a time period. CMA EXAMINATION QUESTIONS

100

. What is the total flexible budget variance? (M) A. $2,205 favorable. C. $1,745 favorable. B. $2,205 unfavorable. D. $1,745 unfavorable.

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STANDARD COSTS AND VARIANCE ANALYSIS

101

. What is the labor mix variance? (M) A. $2,205 unfavorable. B. $2,205 favorable.

C. $1,406 unfavorable. D. $1,406 favorable.

102

. What is the labor yield variance? (M) A. $1,908 favorable. C. $1,733 favorable. B. $1,866 favorable. D. $460 favorable.

Bonus Computation 25. To improve productivity, ST. MICHAEL Corp. instituted a bonus plan where employees are paid 75% of the time saved when production performance exceeds the standard level of production. The company computes the bonus on the basis of four-week periods. The standard production is set at 3 units per hour. Each employee works 37 hours per week, and the wage rate is P24 per hour. Below are data for one 4-week period: Weekly Production (Units) Employe 1st 2nd 3rd 4th Total e ALAN 107 100 110 108 425 JOEL 104 110 115 115 444 ROMY 108 112 112 133 465 TONY 123 120 119 124 486 The employee who had the inconsistent performance (sometimes performing below standard) but got a bonus is (M) a. Alan = P36 bonus. c. Romy = P126 bonus. b. Joel = P54 bonus. d. Tony = P252 bonus. RPCPA 0594 Questions 62 and 63 are based on the following information. RPCPA 0584 Ipil-ipil Woods Inc. grants bonus to its plant employees equal to 50% pay for the time saved in production. The company has set up a standard rate of production of 200 units of cutting board per hour. The standard pay per labor hour is P8. Factory overhead varies at the rate of P2.50 per hour. During the month of June, the employees worked a total of 25,000 direct labor hours and produced 6,000,000 units of cutting boards. The total variable factory overhead amounted to P62,500. Bonus checks are issued to employees in the month following the month in which the standards are exceeded. CMA EXAMINATION QUESTIONS

*. The labor bonus for the production in June is (M) a. P6,250 c. P20,000 b. P12,500 d. P38,000 *. The total net savings to the company for the month of June after deducting the bonus is (M) a. P25,000 c. P52,500 b. P32,500 d. P60,000 OVERHEAD VARIANCE Plant Capacity Theoretical Capital 103 . A manufacturing firm is able to produce 1,000 pairs of shoes per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 800 units per hour. The plant actually operates only 27 days per month. What is the theoretical capacity for the month of April? (E) a. 1,000,000 units c. 518,400 units b. 720,000 units d. 240,000 units Horngren Practical Capacity 104 . A manufacturing firm is able to produce 1,000 pairs of shoes per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 800 units per hour. The plant actually operates only 27 days per month. What is the practical capacity for the month of April? (E) a. 1,000,000 units c. 518,400 units b. 720,000 units d. 240,000 units Horngren Setting Predetermined Rates Budgeted Fixed Factory Overhead 34. The predetermined overhead rate (variable and fixed) is $7.50 per machine hour and the denominator activity level is 135,000 machine hours. If the variable portion of the predetermined overhead rate is $3.00 per machine hours, then the budgeted fixed factory overhead for the year is: (E) a. $30,000. c. $405,000. b. $607,500. d. $1,012,500. G & N 9e Page 40 of 171

MANAGEMENT ADVISORY SERVICES .

ABC Company applies overhead at P8 per direct labor hour of which P3 was variable overhead. Budgeted directed labor hours were 80,000. Budgeted fixed overhead was (E) A. P200,000 C. P400,000 B. P640,000 D. P240,000 RPCPA 1001

Denominator Hours 77. Nevada Company uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied $363,000 of overhead during the year. How many direct labor hours did the company plan to incur? (E) a. 1,150,000 c. 1,200,000 b. 1,190,000 d. 1,210,000 Barfields 105

. In connection with a standard cost system being developed by Flint Co., the following information is being considered with regard to standard hours allowed for output of one unit of product: Hours Average historical performance for the past 3 years 1.85 Production level to satisfy average consumer demand over a seasonal time span 1.60 Engineering estimates based on attainable performance 1.50 Engineering estimates based on ideal performance 1.25 To measure controllable production inefficiencies, what is the best basis for Flint to use in establishing standard hours allowed? (E) a. 1.25 c. 1.60 b. 1.50 d. 1.85 AICPA 1192

Standard Variable Overhead Rate 9. Filter Company’s budget for overhead cost is: total overhead cost = $50,000 + ($4 x direct labor hours). Standard direct labor time is 1.5 hours per unit of product. The standard wage rate is $6 per hour. Standard variable overhead cost for a unit of product is (E) a. $4.00 c. $9.00 b. $6.00 d. $10.00 D, L & H 9e CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 18. PALOS Manufacturing Co. has an expected production level of 175,000 product units for 19x7. Fixed factory overhead is P450,000 and the company applies factory overhead on the basis of expected production level at the rate of P5.20 per unit. The variable overhead cost per unit is (E) a. P2.57 c. P2.93 b. P2.63 d. P3.02 RPCPA 1097 100. The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labor hours. Data for the month of February include the following:  Variable manufacturing overhead cost incurred: $48,700  Total variable overhead variance: $300 F  Standard hours allowed for actual production: 7,000  Actual direct labor hours worked: 6,840 The standard variable overhead rate per direct labor hour is: (E) a. $6.91. c. $7.00. b. $6.95. d. $7.12. G & N 9e 84. The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead: Direct labor-hours (DLH) 10,000 20,000 Total variable overhead costs $11,500 $23,000 Total fixed overhead costs $30,000 $30,000 The following data concerning production pertain to last year's operations:  The company used a denominator activity of 15,000 direct labor-hours to compute the predetermined overhead rate.  The company made 6,850 units of product and worked 14,200 actual hours during the year.  Actual variable overhead was $15,904 and actual fixed overhead was $30,850 for the year.

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MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS 80% 90% 100%* 110% Variable overhead P21,000 P23,000 P25,000 P27,000 Fixed overhead 50,000 50,000 50,000 50,000 Total factory P71,000 P73,000 P75,000 P77,000 overhead * normal capacity In accordance with the standards established, 100,000 units of product should be manufactured when the company operates at its normal capacity. The standard labor time per unit of product is 15 minutes. Actual production in 1980 was 90,000 units of product in 44,000 hours. What is the standard variable factory overhead rate per hour? (M) a. P1.00 c. P2.00 b. P1.50 d. P2.50 RPCPA 1081

 The standard direct labor time is two hours per unit of product. The variable element of the predetermined overhead rate was (per DLH): (E) A. $4.15. C. $2.00. B. $3.00. D. $1.15. G & N 10e 106

.

107

.

Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data. Budgeted Actual Output units 15,000 units 22,000 units Machine-hours 5,000 hours 7,200 hours Variable manufacturing $161,250 $242,000 overhead costs What is the budgeted variable overhead cost rate per output unit? (E) a. $10.75 c. $32.25 b. $11.00 d. $48.40 Horngren White Corporation manufactures football jerseys and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data. Budgeted Actual Output units 20,000 18,000 Machine-hours 30,000 28,000 Variable manufacturing $360,000 $342,000 overhead costs What is the budgeted variable overhead cost rate per output unit? (E) a. $12.00 c. $18.00 b. $12.21 d. $19.00 Horngren

*. Standard costs and budgetary control methods should be closely related. This relationship is especially important for factory overhead. Better control over factory overhead can be achieved if a flexible budget, rather than a fixed budget is used. The flexible budget for Kupang Corporation is summarized below: Percent of Normal Operating Capacity CMA EXAMINATION QUESTIONS

Standard Fixed Overhead Rate 96. A manufacturer of playground equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 5,800 DLHs Fixed overhead cost $58,870 The following data pertain to operations for the most recent period: Actual hours 6,100 DLHs Standard hours allowed for the actual output 6,018 DLHs Actual total fixed overhead cost $58,320 What is the predetermined fixed overhead rate to the nearest cent? (E) A. $10.15 C. $9.65 B. $9.56 D. $10.06 G & N 10e 75.

A manufacturer of playground equipment has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,000 MHs Fixed overhead cost $40,650 The following data pertain to operations for the most recent period: Actual hours 3,400 MHs Page 42 of 171

MANAGEMENT ADVISORY SERVICES Standard hours allowed for the actual output 3,172 MHs Actual total fixed overhead cost $41,600 What is the predetermined fixed overhead rate to the nearest cent? (E) a. $12.24 c. $13.87 b. $13.55 d. $11.96 G & N 9e 85. The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead: Direct labor-hours (DLH) 10,000 20,000 Total variable overhead costs $11,500 $23,000 Total fixed overhead costs $30,000 $30,000 The following data concerning production pertain to last year's operations:  The company used a denominator activity of 15,000 direct labor-hours to compute the predetermined overhead rate.  The company made 6,850 units of product and worked 14,200 actual hours during the year.  Actual variable overhead was $15,904 and actual fixed overhead was $30,850 for the year.  The standard direct labor time is two hours per unit of product. The fixed element of the predetermined overhead rate was (per DLH): (E) A. $4.15. C. $2.00. B. $3.00. D. $1.15. G & N 10e Standard Overhead Rate 2. If annual overhead costs are expected to be P1,000,000 and 200,000 total labor hours are anticipated (80% direct, 20% indirect), the overhead rate based on direct labor hours is (M) A. P6.25 C. P25.00 B. P5.00 D. P4.00 Pol Bobadilla

STANDARD COSTS AND VARIANCE ANALYSIS 32. At the end of the year, actual manufacturing overhead costs were $110,000 and applied manufacturing overhead costs were $118,800. If the denominator activity for the year was 20,000 machine-hours, and if 22,000 standard machine-hours were allowed for the year's production, the predetermined overhead rate per machine-hour was: (E) A. $5.00. C. $5.50. B. $5.94. D. $5.40. G & N 10e 34. Dean Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct laborhours. The company is preparing a flexible budget for next year and the following data are available: At capacity Direct labor-hours 60,000 Variable factory overhead $150,000 Fixed factory overhead $240,000 Assume that Dean's denominator activity for the year is set at 80% of capacity. What would be the total predetermined overhead rate, based on direct labor-hours, for the year? (E) A. $6.00. C. $7.50. B. $6.50. D. $8.13. G & N 10e 25.

ABC Company is preparing a flexible budget for 2004 and the following maximum capacity estimates for the manufacturing division are available: Direct labor hours 60,000 hours Variable factory overhead P600,000 Fixed manufacturing overhead P300,000 Assume that ABC’s expected capacity is 80% of maximum capacity. What would be the total factory overhead rate, based on direct labor hours, in a flexible budget at expected capacity? (E) a. P18.75 C. P16.25 b. P14.25 D. P15.00 Pol Bobadilla

5. Sales Company is preparing a flexible budget for 2004 and the following maximum capacity estimates for Assembly Department are available: Direct labor hours 80,000 hours Variable factory overhead P640,000 CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES Fixed manufacturing overhead P300,000 Assume that Sales’ expected capacity is 75% of maximum capacity. What would be the total factory overhead rate, based on direct labor hours, in a flexible budget at expected capacity? (E) A. P13.00 C. P11.75 B. P15.67 D. P11.00 Pol Bobadilla 35. At the end of the year, a company's Manufacturing Overhead account contained the following data: Manufacturing Overhead Actual $82,140 Applied $78,260 Balance $3,880 If the denominator activity for the year was 40,000 machine-hours, and if 36,400 machine-hours were allowed for the year's production, then the predetermined overhead rate per machine-hour was: (E) A. $2.15. C. $2.26. B. $1.96. D. $2.05. G & N 10e 48.

71.

A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,700 DLHs Overhead costs at the denominator activity level: Variable overhead cost $28,490 Fixed overhead cost $47,545 The following data pertain to operations for the most recent period: Actual hours 3,900 DLHs Standard hours allowed for the actual output 3,850 DLHs Actual total variable overhead cost $29,445 Actual total fixed overhead cost $47,995 What is the predetermined overhead rate to the nearest cent? (E) A. $20.93 C. $19.50 B. $19.86 D. $20.55 G & N 10e

STANDARD COSTS AND VARIANCE ANALYSIS Denominator level of activity 3,300 MHs Overhead costs at the denominator activity level: Variable overhead cost $31,845 Fixed overhead cost $40,425 The following data pertain to operations for the most recent period: Actual hours 3,400 MHs Standard hours allowed for the actual output 3,078 MHs Actual total variable overhead cost $32,980 Actual total fixed overhead cost $38,975 What is the predetermined overhead rate to the nearest cent? (E) a. $21.90 c. $21.16 b. $21.80 d. $21.26 G & N 9e 106. A manufacturer of industrial equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 1,400 DLHs Overhead costs at the denominator activity level: Variable overhead cost $5,670 Fixed overhead cost $27,860 The following data pertain to operations for the most recent period: Actual hours 2,000 DLHs Standard hours allowed for the actual output 1,710 DLHs Actual total variable overhead cost $8,000 Actual total fixed overhead cost $27,210 What is the predetermined overhead rate to the nearest cent? (E) A. $23.95 C. $25.15 B. $16.77 D. $17.61 G & N 10e 92. A furniture manufacturer has a standard costing system based on machinehours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

A furniture manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES Denominator level of activity 1,400 MHs Overhead costs at the denominator activity level: Variable overhead cost $12,040 Fixed overhead cost $17,360 The following data pertain to operations for the most recent period: Actual hours 1,300 MHs Standard hours allowed for the actual output 1,440 MHs Actual total variable overhead cost $11,440 Actual total fixed overhead cost $18,560 What is the predetermined overhead rate to the nearest cent? (E) A. $21.00 C. $23.08 B. $21.43 D. $22.62 G & N 10e 47.

54.

A manufacturing company has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,100 MHs Overhead costs at the denominator activity level: Variable overhead cost $35,075 Fixed overhead cost $77,775 The following data pertain to operations for the most recent period: Actual hours 6,300 MHs Standard hours allowed for the actual output 5,994 MHs Actual total variable overhead cost $36,540 Actual total fixed overhead cost $76,875 What is the predetermined overhead rate to the nearest cent? (E) a. $17.91 c. $18.00 b. $18.59 d. $18.50 G & N 9e The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on a basis of machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: Variable overhead costs (total): Maintenance $36,000 Utilities $20,000

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Fixed overhead costs (total): Supervision $24,000 Depreciation $16,00 During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: Variable overhead costs (total): Maintenance $43,420 Utilities $32,510 Fixed overhead costs (total): Supervision $26,970 Depreciation $16,000 The standard time allowed to complete one unit of product is 3.6 machinehours. The total predetermined overhead rate per machine-hour for November was: (E) A. $1.75. C. $2.97. B. $2.40. D. $1.40. G & N 10e Denominator Hours & Standard Variable Overhead Rate 4. The MPG Reyes Co. owns 6 machines, each of which is run on a 48-hour week basis. Annually, 100 working hours are allotted for each machine for periodic cleansing and greasing. During the year, the company was closed for 250 hours due to a strike triggered by labor-management disputes. With the intervention of the Labor Ministry, the company was able to resume operations. However, it suffered unexpected delays in obtaining the needed raw materials, thus resulting in additional loss of machine hours of 950 . Manufacturing expenses which vary with productive hours totaled P38,600 for the 6 machines. Assuming that the company normally closes for 3 weeks annually due to slack season, what is the normal number of machine hours worked and how much is the variable expense per working hours? (D) RPCPA 1086 a. b. c. d. Normal Number of Machine 13,176 12,312 14,376 13,512 Hours Variable Expense per Working P2.92 P3.14 P2.92 P3.14 Hour Page 45 of 171

MANAGEMENT ADVISORY SERVICES ONE-WAY VARIANCE Variable Overhead Rate per Hour 36. Barrick Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Total budgeted costs at 200,000 direct labor-hours are as follows: Variable costs (total): Packing supplies $120,000 Indirect labor $180,000 Fixed costs (total): Utilities $100,000 Rent $ 40,000 Insurance $ 20,000 The flexible budget for factory overhead would show that the variable factory overhead cost per direct labor-hour is: A. $1.80. C. $0.90. B. $1.50. D. $0.60. G & N 10e 39.

STANDARD COSTS AND VARIANCE ANALYSIS Indirect labor Fixed overhead costs (total): Utilities Insurance Rent The flexible budget would show total variable overhead cost direct labor hour as: (E) a. $0.60. c. $1.50. b. $0.90. d. $1.80.

$180,000 $100,000 $ 40,000 $ 20,000 in dollars per G & N 9e

Wicks Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Budgeted costs at 100,000 direct labor-hours are as follows: Variable costs (total): Packing supplies $70,000 Indirect labor $90,000 Fixed costs (total): Utilities $50,000 Rent $20,000 Insurance $10,000 The flexible budget for factory overhead would show that the variable overhead per direct labor-hour is: A. $1.90. C. $0.90. B. $1.60. D. $0.70. G & N 10e

44.

Pollitt Potato Packers has a flexible budget for manufacturing overhead that is based on direct labor hours. The following overhead costs appear on the flexible budget at the 200,000-hour level of activity: Variable overhead costs (total): Packing supplies $120,000 CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES Flexible Variable Overhead Budget 38. Barrick Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Total budgeted costs at 200,000 direct labor-hours are as follows: Variable costs (total): Packing supplies $120,000 Indirect labor $180,000 Fixed costs (total): Utilities $100,000 Rent $ 40,000 Insurance $ 20,000 If Barrick Company plans to operate at 190,000 direct labor-hours during the next period, the flexible budget would show indirect labor costs of: A. $171,000. C. $114,000. B. $180,000. D. $270,000. G & N 10e 41.

43.

Wicks Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Budgeted costs at 100,000 direct labor-hours are as follows: Variable costs (total): Packing supplies $70,000 Indirect labor $90,000 Fixed costs (total): Utilities $50,000 Rent $20,000 Insurance $10,000 If Wicks Company plans to operate at 90,000 direct labor-hours during the next period, the flexible budget would show indirect labor costs of: A. $144,000. C. $90,000. B. $63,000. D. $81,000. G & N 10e Pollitt Potato Packers has a flexible budget for manufacturing overhead that is based on direct labor hours. The following overhead costs appear on the flexible budget at the 200,000-hour level of activity: Variable overhead costs (total): Packing supplies $120,000 Indirect labor $180,000

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Fixed overhead costs (total): Utilities Insurance Rent At an activity level of 180,000 direct labor hours, the flexible show indirect labor cost of: (E) a. $180,000. c. $144,000. b. $108,000. d. $162,000.

$100,000 $ 40,000 $ 20,000 budget would G & N 9e

Flexible Fixed Overhead Budget 40. Wicks Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Budgeted costs at 100,000 direct labor-hours are as follows: Variable costs (total): Packing supplies $70,000 Indirect labor $90,000 Fixed costs (total): Utilities $50,000 Rent $20,000 Insurance $10,000 At an activity level of 70,000 direct labor-hours, the flexible budget would show the budgeted amount for utilities as: A. $35,000. C. $80,000. B. $70,000. D. $50,000. G & N 10e 46.

Pollitt Potato Packers has a flexible budget for manufacturing overhead that is based on direct labor hours. The following overhead costs appear on the flexible budget at the 200,000-hour level of activity: Variable overhead costs (total): Packing supplies $120,000 Indirect labor $180,000 Fixed overhead costs (total): Utilities $100,000 Insurance $ 40,000 Rent $ 20,000 At an activity level of 160,000 direct labor hours, the flexible budget would show the budgeted amount for utilities to be: (E) Page 47 of 171

MANAGEMENT ADVISORY SERVICES a. $80,000. b. $100,000.

STANDARD COSTS AND VARIANCE ANALYSIS c. $120,000. d. $160,000.

Flexible Budget Based on Actual Output Budgeted Fixed Overhead 37. Barrick Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Total budgeted costs at 200,000 direct labor-hours are as follows: Variable costs (total): Packing supplies $120,000 Indirect labor $180,000 Fixed costs (total): Utilities $100,000 Rent $ 40,000 Insurance $ 20,000 At an activity level of 170,000 direct labor-hours, the flexible budget for factory overhead would show the budgeted amount for utilities as: A. $ 85,000. C. $160,000. B. $140,000. D. $100,000. G & N 10e 45.

Hours of activity 1,500 2,000 Fixed costs P7,500 P7,500 Variable costs 5,250 7,000 Total costs P12,750 P14,500 The budgeted total cost for this department at the 1,700 hour level of activity is (E) a. P13,450 c. P19,757 b. P13,625 d. P27,250 RPCPA 1077

G & N 9e

Pollitt Potato Packers has a flexible budget for manufacturing overhead that is based on direct labor hours. The following overhead costs appear on the flexible budget at the 200,000-hour level of activity: Variable overhead costs (total): Packing supplies $120,000 Indirect labor $180,000 Fixed overhead costs (total): Utilities $100,000 Insurance $ 40,000 Rent $ 20,000 At an activity level of 180,000 direct labor hours, the flexible budget would show total budgeted fixed costs to be: (E) a. $100,000. c. $150,000. b. $144,000. d. $160,000. G & N 9e

5. Saldua Co. uses a monthly cost formula for overhead of P50,000 + P30 for each direct labor hour worked. For the coming year, Saldua plans to manufacture 200,000 units. Each unit requires five minutes of direct labor. Saldua’s total budgeted overhead for the coming year is (M) A. P550,000 C. P1,200,000 B. P1,100,000 D. P650,000 Pol Bobadilla Monthly Budgeted Overhead 79. Ashley Co. has developed the following flexible budget formula for monthly overhead: For output of less than 200,000 units: $36,600 + $.80(units) For output of 200,000 units or more: $43,000 + $.80(units) How much overhead should Ashley expect if the firm plans to produce 200,000 units? (E) a. $52,600 c. $196,600 b. $59,000 d. $203,000 Barfields 108

. Scott Company uses the following flexible budget formula for annual maintenance costs: Total cost = $6,000 + $0.70 per machine hour The current month's budget is based on planned machine time of 30,000 hours. Monthly maintenance cost included in this flexible budget is (M) A. $20,500 C. $21,500 B. $21,000 D. $27,000 Gleim

109

Annual Budgeted Overhead *. Assuming the flexible budget of Dept. 1 is as follows: CMA EXAMINATION QUESTIONS

. A company has the following budget formula for annual electricity expense in its shop: Expense = $7,200 + ($0.60 x units produced) Page 48 of 171

MANAGEMENT ADVISORY SERVICES If management expects to produce 20,000 units during February, the appropriate monthly flexible budget allowance for the purpose of performance evaluation should be (M) a. $7,200 c. $12,600 b. $12,000 d. $19,200 Gleim

STANDARD COSTS AND VARIANCE ANALYSIS a. P10,250 b. P11,075

. A company prepares a flexible budget each month for manufacturing costs. Formulas have been developed for all costs within a relevant range of 5,000 to 15,000 units per month. The budget for electricity (a semivariable cost) is $19,800 at 9,000 units per month, and $21,000 at 10,000 units per month. How much should be budgeted for electricity for the coming month if 12,000 units are to be produced? (E) A. $26,400 C. $23,400 B. $25,200 D. $22,200 CIA 0586 IV-12

*. Premised on past experience, Mayo Corp. adopted the following budgeted formula for estimating shipping expenses. The company’s shipments average 12 kilos per shipment. Shipping costs = P8,000 + (0.25 x kgs. shipped) Planned Actual Sales order 800 780 Shipments 800 820 Units shipped 8,000 9,000 Sales 240,000 288,000 Total kilograms shipped 9,600 12,300 The actual shipping costs for the month amounted to P10,500. The appropriate monthly flexible budget allowance for shipping costs for purposes of performance evaluation would be (M) CMA EXAMINATION QUESTIONS

RPCPA 0596

111

. Based on past experience, a company has developed the following budget formula for estimating its shipping expenses. The company’s shipments average 12 lbs. per shipment: Shipping costs = $16,000 + ($0.50 x lbs. shipped) The planned activity and actual activity regarding orders and shipments for the current month are given in the following schedule: Plan Actual Sales orders 800 780 Shipments 800 820 Units shipped 8,000 9,000 Sales $120,000 $144,000 Total pounds shipped 9,600 12,300 The actual shipping costs for the month amounted to $21,000. The appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation would be (M) a. $20,680. c. $20,800. b. $20,920. d. $22,150. CMA 1295 3-24

112

. A company has developed the budget formula below for estimating its shipping expenses. Shipments have historically averaged 12 pounds per shipment. Shipping costs = $18,000 + ($0.60 x Pounds shipped) The planned activity and actual activity regarding orders and shipments for the current month are given in the following schedule: Plan Actual Sales orders 800 780 Shipments 800 820 Units shipped 8,000 9,000 Sales $120,000 $144,000 Total pounds shipped 9,600 12,500 The actual shipping costs for the month amounted to $21,000. The appropriate monthly flexible budget allowance for shipping costs for the purpose of performance evaluation should be (M) a. $18,000 c. $23,760

22. Molds Corporation has developed the following flexible budget formula for annual indirect labor costs: Total Cost = P300,000 + P5.00 per machine hour Operating budgets for the current month are based upon 18,000 machine hours of planned machine time. Indirect labor costs included in this planning budget are: (M) a. P300,000 c. P 90,000 b. P390,000 d. P115,000 Pol Bobadilla 110

c. P10,340 d. P10,400

Page 49 of 171

MANAGEMENT ADVISORY SERVICES b. $18,492

STANDARD COSTS AND VARIANCE ANALYSIS d. $25,500

Gleim

Actual Output 113 . At the beginning of the year, Smith Inc. budgeted the following: Units 10,000 Sales $100,000 Minus: Total variable expenses 60,000 Total fixed expenses 20,000 Net income $ 20,000 Factory overhead: Variable $ 30,000 Fixed 10,000 There were no beginning inventories. At the end of the year, no work was in process, total factory overhead incurred was $39,500, and underapplied factory overhead was $1,500. Factory overhead was applied on the basis of budgeted unit production. How many units were produced this year? (D) A. 10,250. C. 9,875. B. 10,000. D. 9,500. Gleim Applied Overhead Standard Hours Allowed for Actual Output 114 . Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours. Each unit requires two standard hours of labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was $3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: Actual production 198,000 Units Actual direct labor-hours 440,000 direct labor-hours Actual variable overhead $352,000 Actual fixed overhead $575,000 The standard hours allowed for actual production for the year ended November 30 total (M) A. 247,500. C. 400,000. CMA EXAMINATION QUESTIONS

B. 396,000.

D. 495,000.

CMA 1290 3-5

Applied Fixed Overhead 85. Actual fixed overhead is $33,300 (12,000 machine hours) and fixed overhead was estimated at $34,000 when the predetermined rate of $3.00 per machine hour was set. If 11,500 standard hours were allowed for actual production, applied fixed overhead is (E) a. $33,300. b. $34,000. c. $34,500. d. not determinable without knowing the actual number of units produced. Barfield Total Overhead Applied 86. One unit requires 2 direct labor hours to produce. Standard variable overhead per unit is $1.25 and standard fixed overhead per unit is $1.75. If 330 units were produced this month, what total amount of overhead is applied to the units produced? (E) a. $990 b. $1,980 c. $660 d. cannot be determined without knowing the actual hours worked Barfield 27. Overhead cost is applied to units based on direct labor hours. For April, total overhead cost was budgeted at $80,000 based on a denominator activity level of 20,000 direct labor hours for the month. The standard cost card indicates that each unit of finished product requires 2 direct laborhours. The following data are available for April's activity: Number of units produced 9,500 Direct labor hours worked 19,500 Actual total overhead cost incurred $79,500 What amount of total overhead cost would have been applied to production for the month of April? (E) a. $76,000. c. $79,500. b. $78,000. d. $80,000. AICPA, Adapted

Page 50 of 171

MANAGEMENT ADVISORY SERVICES 31. The Rowe Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of machine-hours. During January, the company budgeted to incur $225,000 in manufacturing overhead cost and to operate at a denominator activity level of 25,000 machine-hours. At standard, each unit of finished product requires 3 machine-hours. The following cost and activity were recorded during January: Total actual manufacturing overhead cost incurred $217,750 Units of product completed 8,000 Actual machine-hours worked 23,000 The amount of overhead cost that the company applied to Work in Process for January was: (E) A. $217,750. C. $221,600. B. $225,000. D. $216,000. G & N 10e 30. The Ammon Company uses a standard cost system in which manufacturing overhead is applied to units on the basis of machine-hours. During July, the company budgeted $350,000 in manufacturing overhead cost at a denominator activity of 25,000 machine-hours. At standard, each unit of finished product requires 5 machine-hours. The follow cost and activity were recorded during July: Total actual manufacturing overhead cost incurred $325,000 Units of product completed 4,500 Actual machine-hours worked 23,000 The amount of overhead cost that the company applied to work in process for July was: (E) A. $292,500. C. $322,000. B. $315,000. D. $325,000. G & N 10e 33. The Judd Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of machine-hours. During May, the company budgeted $320,000 in manufacturing overhead cost at a denominator activity of 20,000 machine-hours. At standard, each unit of finished product requires 4 machine-hours. The following cost and activity was recorded during May: Total actual manufacturing overhead cost incurred $335,500 Units of product completed 4,700 CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Actual machine-hours worked 21,000 The amount of overhead cost that the company applied to Work in Process for May was: (E) A. $336,000. C. $300,800. B. $335,500. D. $315,370. G & N 10e 33. The Adlake Company makes and sells a single product and uses a standard cost system. During October, the company budgeted $300,000 in manufacturing overhead cost at a denominator activity of 20,000 machinehours. At standard, each unit of finished product requires 5 machine-hours. The following cost and activity were recorded during October: Total actual manufacturing overhead cost incurred $294,000 Units of product completed 3,800 Actual machine-hours worked 19,422 The amount of overhead cost that the company applied to work in process for October was: (E) a. $279,300. c. $294,000. b. $291,330. d. $285,000. G & N 9e 115

. Union Company uses a standard cost accounting system. The following factory O/H and production data are available for August? Standard fixed O/H rate per DLH $1 Standard variable O/H rate per DLH $4 Budgeted monthly DLH 40,000 Actual DLH worked 39,500 Standard DLH allowed for actual production 39,000 Overall O/H variance – favorable $2,000 The applied factory O/H for August should be (E) a. $195,000 c. $197,500 b. $197,000 d. $199,500 AICPA 1181 I-24

116

. River Company uses a standard-cost accounting system. It applies overhead based on direct labor hours. The following overhead costs and production data are available for March: Standard fixed overhead rate per DLH $1.50 Standard variable overhead rate per DLH $5.00 Budgeted monthly DLH 30,000 Page 51 of 171

MANAGEMENT ADVISORY SERVICES Actual DLH worked Standard DLH allowed for actual production Overall overhead variance -- favorable What is the applied factory overhead for March? (E) A. $137,500 C. $178,750 B. $176,250 D. $182,000

STANDARD COSTS AND VARIANCE ANALYSIS 28,000 27,500 $2,500

Denominator level of activity 1,400 MHs Overhead costs at the denominator activity level: Variable overhead cost $12,040 Fixed overhead cost $17,360 The following data pertain to operations for the most recent period: Actual hours 1,300 MHs Standard hours allowed for the actual output 1,440 MHs Actual total variable overhead cost $11,440 Actual total fixed overhead cost $18,560 How much overhead was applied to products during the period to the nearest dollar? (E) A. $30,000 C. $27,300 B. $30,240 D. $29,400 G & N 10e

Gleim

107. A manufacturer of industrial equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 1,400 DLHs Overhead costs at the denominator activity level: Variable overhead cost $5,670 Fixed overhead cost $27,860 The following data pertain to operations for the most recent period: Actual hours 2,000 DLHs Standard hours allowed for the actual output 1,710 DLHs Actual total variable overhead cost $8,000 Actual total fixed overhead cost $27,210 How much overhead was applied to products during the period to the nearest dollar? (E) A. $33,530 C. $47,900 B. $40,955 D. $35,210 G & N 10e

72.

A furniture manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 MHs Overhead costs at the denominator activity level: Variable overhead cost $31,845 Fixed overhead cost $40,425 The following data pertain to operations for the most recent period: Actual hours 3,400 MHs Standard hours allowed for the actual output 3,078 MHs Actual total variable overhead cost $32,980 Actual total fixed overhead cost $38,975 How much overhead was applied to products during the period to the nearest dollar? (E) a. $74,460 c. $67,408 b. $72,270 d. $71,955 G & N 9e

49.

A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

93. A furniture manufacturer has a standard costing system based on machinehours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

CMA EXAMINATION QUESTIONS

Page 52 of 171

MANAGEMENT ADVISORY SERVICES Denominator level of activity 3,700 DLHs Overhead costs at the denominator activity level: Variable overhead cost $28,490 Fixed overhead cost $47,545 The following data pertain to operations for the most recent period: Actual hours 3,900 DLHs Standard hours allowed for the actual output 3,850 DLHs Actual total variable overhead cost $29,445 Actual total fixed overhead cost $47,995 How much overhead was applied to products during the period to the nearest dollar? (E) A. $79,118 C. $77,440 B. $76,035 D. $80,145 G & N 10e 48.

55.

A manufacturing company has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,100 MHs Overhead costs at the denominator activity level: Variable overhead cost $35,075 Fixed overhead cost $77,775 The following data pertain to operations for the most recent period: Actual hours 6,300 MHs Standard hours allowed for the actual output 5,994 MHs Actual total variable overhead cost $36,540 Actual total fixed overhead cost $76,875 How much overhead was applied to products during the period to the nearest dollar? (E) a. $112,850 c. $116,550 b. $113,415 d. $110,889 G & N 9e The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on a basis of machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: Variable overhead costs (total):

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Maintenance $36,000 Utilities $20,000 Fixed overhead costs (total): Supervision $24,000 Depreciation $16,00 During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: Variable overhead costs (total): Maintenance $43,420 Utilities $32,510 Fixed overhead costs (total): Supervision $26,970 Depreciation $16,000 The standard time allowed to complete one unit of product is 3.6 machinehours. The total amount of overhead cost applied to Work in Process during November was: (E) A. $ 47,520. C. $106,528. B. $ 66,528. D. $114,048. G & N 10e 2. WORD PROCESSORS, Inc. provides computer processing services, and relevant data set up by the firm’s management are shown below: No. of pages per hour 20 No. of hours per month 500 Variable costs per hour P30 Fixed costs per month P10,000 For the month of May, 19x4, 12,000 pages are generated in 450 hours. The actual variable costs totaled P13,200, while the actual fixed costs equaled the estimated amount. The total standard cost for May was (M) a. P25,000 c. P30,000 b. P27,500 d. P31,500 RPCPA 0594 89. The Stephens Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company has the following flexible budget (in condensed form) for manufacturing overhead: Page 53 of 171

MANAGEMENT ADVISORY SERVICES Direct labor-hours (DLH) 15,000 30,000 Total variable overhead costs $17,250 $34,500 Total fixed overhead costs $45,000 $45,000 The following data concerning production pertain to last year's operations:  The company used a denominator activity of 22,500 direct labor hours to compute the predetermined overhead rate.  The company made 10,275 units of product and worked 21,300 actual hours during the year.  Actual variable overhead was $23,856 and actual fixed overhead was $46,275 for the year.  The standard direct labor time is 2 hours per unit of product. The fixed overhead cost applied during the year was: (E) A. $20,550. C. $45,000. B. $41,100. D. $46,275. G & N 10e Over- (Under-) Applied Overhead Over-applied Overhead 91. Air Inc. uses a standard cost system. Overhead cost information for October is as follows: Total actual overhead incurred $12,600 Fixed overhead budgeted $3,300 Total standard overhead rate per MH $4 Variable overhead rate per MH $3 Standard MHs allowed for actual production 3,500 What is the total overhead variance? (E) a. $1,200 F c. $1,400 F b. $1,200 U d. $1,400 U Barfield

22. Factory overhead for the Cabanatuan Co. has been estimated as follows: Fixed overhead P30,000 Variable overhead 90,000 Estimated direct labor hours 40,000 Production for the month reached 75% of the budget, and actual factory overhead totaled P86,000. The over- (under-) applied factory overhead was (E) a. P34,000 c. P4,000 CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS b. (P4,000)

d. None of the above.

RPCPA 1079

*. The following data are presented: Budgeted Actual Production in units 50,000 55,000 Manufacturing overhead P750,000 P800,000 Sales in units No data 47,000 No beginning inventories The under-applied or over-applied overhead is: (M) a. P25,000 under-applied. c. P75,000 over-applied. b. P25,000 over-applied. d. P75,000 under-applied. RPCPA 1097 Under-applied Overhead *. Information on Bustos Manufacturing Company’s overhead costs is as follows: Budgeted overhead based on standard direct-labor hours allowed P90,000 Budgeted overhead based on actual direct-labor hours allowedP89,000 Standard applied overhead P86,000 Actual overhead P92,000 What is the total overhead variance (E) a. P4,000 favorable. c. P8,000 unfavorable. b. P6,000 unfavorable. d. P9,000 favorable. RPCPA 1079 117

. Anderson Company prepared the following information using a flexible budget system. Percentage of total capacity 75% 90% Direct labor hours 30,000 36,000 Variable factory overhead $52,500 $63,000 Fixed factory overhead $144,000 $144,000 Total factory overhead rate per DLH $6.55 $5.75 Anderson operated at 75% of capacity during the year. However, Anderson applied factory overhead based on 90% of capacity. If actual factory Page 54 of 171

MANAGEMENT ADVISORY SERVICES overhead was equal to the factory overhead budgeted for 75% of capacity, what is the amount of overhead variance for the year? (M) A. $28,500 under-absorbed. C. $24,000 under-absorbed. B. $28,500 over-absorbed. D. $24,000 over-absorbed. Gleim 118

. Peters Company uses a flexible budget system and prepared the following information for the year Percentage of total capacity 80% 90% Direct labor hours 24,000 27,000 Variable factory O/H $48,000 $54,000 Fixed factory O/H $108,000 $108,000 Total factory O/H rate per DLH $6.50 $6.00 Peters operated at 80% capacity during the year but applied factory overhead based on the 90% capacity level. Assuming that actual factory O/H was equal to the budgeted amount for the attained capacity, what is the amount of O/H variance for the year? (M) a. $6,000 over-absorbed. c. $12,000 over-absorbed. b. $6,000 under-absorbed. d. $12,000 under-absorbed. AICPA 0581 I-25

Actual Overhead 25. Markham applies overhead at $4 per machine hour. During March it worked 10,000 hours and over-applied overhead by $3,000. Actual overhead was (E) a. $43,000 c. $37,000 b. $40,000 d. None of the above. D, L & H 9e 119

STANDARD COSTS AND VARIANCE ANALYSIS b. $45,000

d. $120,000

Standard Rate, Applied Overhead & Total Overhead Variance Questions 116 through 118 are based on the following information. L.J. McCarthy Patie Company uses a standard FIFO, process-cost system to account for its only product, Mituea. Patie has found that direct machine hours (DMH) provide the best estimate of the application of O/H. Four (4) standard direct machine hours are allowed for each unit. Using simple linear regression analysis in the form y = a + b(DMH), given that (A) equals fixed costs and (B) equals variable costs, Patie has developed the following O/H budget for a normal activity level of 100,000 direct machine hours: ITEM (y) a b Supplies $ 0.50 Indirect Labor $ 54,750 6.50 Depreciation -- Plant and Equipment 27,000 Property Taxes and Insurance 32,300 Repairs and Maintenance 14,550 1.25 Utilities 3,400 4.75 Total O/H $132,000 $13.00 Actual fixed O/H incurred was $133,250, and actual variable O/H was $1,225,000. Patie produced 23,500 equivalent units during the year using 98,700 direct machine hours.

. The following were among Gage Co.’s 2000 costs: Normal spoilage $ 5,000 Freight out 10,000 Excess of actual manufacturing costs over standard costs 20,000 Standard manufacturing costs 100,000 Actual prime manufacturing costs 80,000 Gage’s 2000 actual manufacturing overhead was (M) a. $40,000 c. $55,000

CMA EXAMINATION QUESTIONS

Page 55 of 171

MANAGEMENT ADVISORY SERVICES 120

. What is the standard O/H rate? (E) A. $13.00 per DMH. B. $1.32 per DMH

STANDARD COSTS AND VARIANCE ANALYSIS C. $14.32 per DMH. D. $13.76 per DMH.

121

. How much O/H should be applied to production? (E) A. $1,413,384 C. $1,358,250 B. $1,432,000 D. $1,346,080

122

. What is the total O/H variance? A. $12,170 unfavorable. B. $55,134 unfavorable.

C. $55,134 favorable. D. $73,750 favorable.

TWO-WAY VARIANCE Budget at Standard Hours *. Standard costs and budgetary control methods should be closely related. This relationship is especially important for factory overhead. Better control over factory overhead can be achieved if a flexible budget, rather than a fixed budget is used. The flexible budget for Kupang Corporation is summarized below: Percent of Normal Operating Capacity 80% 90% 100%* 110% Variable overhead P21,000 P23,000 P25,000 P27,000 Fixed overhead 50,000 50,000 50,000 50,000 Total factory P71,000 P73,000 P75,000 P77,000 overhead * normal capacity In accordance with the standards established, 100,000 units of product should be manufactured when the company operates at its normal capacity. The standard labor time per unit of product is 15 minutes. Actual production in 1980 was 90,000 units of product in 44,000 hours. What is the budgeted factory overhead adjusted to standard hours? (M) a. P67,500 c. P75,000 b. P72,500 d. P90,500 RPCPA 1081

CMA EXAMINATION QUESTIONS

Budget (Controllable) Variance *. Assuming actual factory overhead is P7,250; budgeted fixed overhead is P3,600; variable overhead rate is P2.00 per hour and the standard hours in the product are 2,000 hours. The controllable variance is (E) a. unfavorable at P350 c. favorable at P350 b. unfavorable at P3,250 d. favorable at P3,250 RPCPA 1078 7. ABC Company has prepared the following flexible budget for production costs: total production costs = $340,000 + $9x, where x is the number of units produced. ABC produced 20,000 units at a total cost of $490,000. The variance of actual costs from budgeted costs was (E) a. $150,000 favorable. c. $30,000 unfavorable. b. $30,000 favorable. d. $90,000 unfavorable. D, L & H 9e 47. Monroe Company has prepared the following flexible budget for production costs: total production costs = $840,000 + $16x, where X is the number of units produced. Monroe produced 20,000 units at a total cost of $1,290,000. The variance of actual costs from budgeted costs was (E) a. $450,000 favorable. c. $130,000 unfavorable. b. $130,000 favorable. d. $450,000 unfavorable. D, L & H 9e 123

. Samuel Company provided the following data for June production activity. Samuel uses a two-way analysis of overhead variances. Actual variable factory overhead incurred $294,000 Variable factory overhead rate per DLH $6.00 Standard DLH allowed 49,500 Actual DLH 48,000 The budget (controllable) variance for June, assuming that budgeted fixed overhead costs equal actual fixed costs, is (M) A. $3,000 favorable. C. $9,000 favorable. B. $6,000 unfavorable. D. $9,000 unfavorable. Gleim

*. Roig Enterprises manufactures different types of aluminum products for different industries. Standard cost accounting systems are used. The following data are available: Actual total overhead P40,000 Budgeted fixed costs P10,200 Page 56 of 171

MANAGEMENT ADVISORY SERVICES Total overhead application rate per standard direct labor hourP 2.50 Actual hours used 13,980 Normal activity in hours 12,000 Standard hours allowed 15,000 The company uses a two-way analysis of overhead variances. The controllable variance of Roig Enterprises is (M) a. P2,500 favorable c. P5,050 favorable b. P2,550 unfavorable d. P5,050 unfavorable RPCPA 0581 *. Beacon Company manufactures various types of plastic and rubber coated tubing products for various industries. Standard cost accounting system is used. The following are available: Actual total overhead P 44,000 Budgeted fixed costs P 12,600 Total overhead application rate per standard direct labor hourP 2.50 Actual hours used 16,000 Standard hours allowed 17,000 Normal activity in hours 14,000 The company uses a two-way analysis of overhead variances. The controllable variance of Beacon Company is (M) a. P1,500 favorable. c. P4,200 favorable. b. P1,500 unfavorable. d. P4,200 unfavorable. RPCPA 1080 124

. Universal Company uses a standard cost system and prepared the following budget at normal capacity for the month of January: Direct labor hours 24,000 Variable factory O/H $48,000 Fixed factory O/H $108,000 Total factory O/H per DLH $6.50 Actual data for January were as follows: Direct labor hours worked 22,000 Total factory O/H $147,000 Standard DLH allowed for capacity attained 21,000 Using the two-way analysis of O/H variances, what is the budget (controllable) variance for January? (M) a. $3,000 favorable. c. $9,000 favorable.

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS b. $13,500 unfavorable. 39 125

d. $10,500 unfavorable. CPA 0583 I-

. Wheeler Company uses a standard-cost system. Wheeler prepared the following budget using normal capacity for the month of May: Direct labor hours 36,000 Variable factory overhead $72,000 Fixed factory overhead $162,000 Actual results were as follows: Direct labor hours worked 33,000 Total factory overhead $220,500 Standard DLH allowed for capacity attained 31,500 What is the budget (controllable) variance for May using the two-way analysis of overhead variances? (M) A. $4,500 favorable. C. $7,500 unfavorable. B. $7,500 favorable. D. $13,500 unfavorable. Gleim

90. Martin Company uses a two-way analysis of overhead variances. Selected data for the April production activity are as follows: Actual variable OH incurred $196,000 Variable OH rate per MH $6 Standard MHs allowed 33,000 Actual MHs 32,000 Assuming that budgeted fixed overhead costs are equal to actual fixed costs, the controllable variance for April is a. $2,000 F. c. $4,000 F. b. $4,000 U. d. $6,000 F. Barfield 126

. J. R. Richard Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Direct materials $14.50 Direct labor (2 direct labor hours x $8) 16.00 Manufacturing overhead (2 direct labor hours x $11) 22.00 Total standard cost $52.50

Page 57 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

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 $3,600,000 Fixed 3,000,000 $6,600,000 During November, Richard produced 26,000 units. Richard used 53,500 direct labor hours in November at a cost of $433,350. Actual manufacturing overhead for the month was $250,000 fixed and $325,000 variable. The manufacturing overhead controllable variance for November is (M) A. $9,000 unfavorable C. $9,000 favorable B. $13,000 unfavorable D. $4,000 favorable CMA adapted Questions 1 & 2 are based on the following information. CIA adapted. A company's only service department provides the following data: Service Center Monthly Service Hours Actual Monthly Budget Available Expense Carpenter $40,000 1,600 $47,800 Shop It serves three producing departments that show the following budgeted and actual cost and service-hours data: Carpenter Shop Department Estimated Services Required Actual Services No. Used 1 350 hrs. 600 hrs. 2 800 hrs. 750 hrs. 3 450 hrs. 650 hrs. 127

. The sold-hour rate for the carpenter shop is: A. $29.88 B. $20.00

128

C. $25.00 D. $23.90

. The spending variance for the carpenter shop, assuming that 80% of the budgeted expense is fixed, is: A. $5,800 unfav. B. $7,800 unfav.

CMA EXAMINATION QUESTIONS

C. $5,800 fav. D. $7,800 fav.

Volume Variance *. Roig Enterprises manufactures different types of aluminum products for different industries. Standard cost accounting systems are used. The following data are available: Actual total overhead P40,000 Budgeted fixed costs P10,200 Total overhead application rate per standard direct labor hourP 2.50 Actual hours used 13,980 Normal activity in hours 12,000 Standard hours allowed 15,000 The company uses a two-way analysis of overhead variances. The volume variance of Roig Enterprises is (M) a. P2,550 favorable c. P9,990 favorable b. P2,550 unfavorable d. P9,990 unfavorable RPCPA 0581 *. The following data were gathered from the Paliwas Company’s overhead costs for the January, 1983 production activity: Actual total overhead incurred P112,500 Budgeted fixed overhead P 40,500 Standard direct-labor hours allowed for actual production 15,000 Standard fixed overhead rate per direct-labor hour P2.25 Standard variable overhead rate per direct-labor hour P3.25 Paliwas Company has been maintaining a standard absorption and flexible budgeting system. It also uses the two-variance method (two-way) for overhead variances. What is Paliwas volume (denominator) variance for January, 1983? (M) a. P6,750 favorable c. P8,250 favorable b. P6,750 unfavorable d. P8,250 unfavorable RPCPA 1083 *. Beacon Company manufactures various types of plastic and rubber coated tubing products for various industries. Standard cost accounting system is used. The following are available: Actual total overhead P 44,000 Budgeted fixed costs P 12,600 Total overhead application rate per standard direct labor hourP 2.50 Actual hours used 16,000 Page 58 of 171

MANAGEMENT ADVISORY SERVICES Standard hours allowed 17,000 Normal activity in hours 14,000 The company uses a two-way analysis of overhead variances. The volume variance of Beacon Company is (M) a. P2,700 favorable. c. P7,500 favorable. b. P2,700 unfavorable. d. P7,500 unfavorable. RPCPA 1080 Budgeted Capacity *. JKL Co. has total budgeted fixed costs of P75,000. Actual production of 19,500 units resulted in a $3,000 favorable volume variance. What normal capacity was used to determine the fixed overhead rate? (M) a. 18,750 c. 17,590 b. 20,313 d. 16,500 RPCPA 1001

STANDARD COSTS AND VARIANCE ANALYSIS b. $160,000 32.

d. $150,000

D, L & H 9e

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 $6,400 unfavorable, then the total budgeted fixed overhead cost for the month was: (M) a. $96,000. c. $100,000. b. $102,400. d. $98,600. G & N 9e

*. Eastern Co. has total budgeted fixed costs of $150,000. Actual production of 39,000 units resulted in a $6,000 favorable volume variance. What normal capacity was used to determine the fixed overhead rate? (M) a. 33,000 c. 40,560 b. 37,500 d. 40,625 D, L & H 9e

Actual Output 38. Beta Company has a standard fixed cost of $10 per unit using a normal capacity of 11,000 units. An unfavorable volume variance of $12,000 resulted. What was the volume produced? (E) a. 9,800 c. 12,200 b. 11,000 d. 10,000 D, L & H 9e

49. Western Co. has total budgeted fixed costs of $72,000. Actual production of 5,500 units resulted in a $6,000 unfavorable volume variance. What normal capacity was used to determine the fixed overhead rate? (M) a. 5,000 c. 6,000 b. 5,500 d. 5,077 D, L & H 9e

48. Sigma Company has a standard fixed cost of $18 per unit using a normal capacity of 9,000 units. A favorable volume variance of $18,000 resulted. What was the volume produced? (E) a. 8,000 c. 10,000 b. 9,000 d. 9,500 D, L & H 9e

Budgeted Fixed Overhead Costs 41. Western Company has a standard fixed cost of $8 per unit. At an actual production of 8,000 units a favorable volume variance of $12,000 resulted. What were total budgeted fixed costs? (E) a. $52,000 c. $76,000 b. $64,000 d. $80,000 D, L & H 9e

Budget and Volume Variance Actual Overhead . The MABINI CANDY FACTORY has the following budgeted factory overhead costs: Budgeted fixed monthly factory overhead costs P85,000 Variable factory overhead P4.00 per direct labor hour For the month of January, the standard direct labor hours allowed were 25,000. An analysis of the factory overhead shows that in January, the factory had an unfavorable budget (controllable) variance of P3,500 and a favorable volume variance of P1,200. The factory uses a two-way analysis of factory overhead variances.

37. Alpha Company has a standard fixed cost of $10 per unit. At an actual production of 16,000 units an unfavorable volume variance of $20,000 resulted. What were total budgeted fixed costs? (E) a. $140,000 c. $180,000 CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES The actual factory overhead incurred in January was (M) a. P186,200 c. P181,500 b. P188,500 d. P103,500

STANDARD COSTS AND VARIANCE ANALYSIS following O/H budget for a normal activity level of 100,000 direct machine hours: RPCPA 0589

Applied Overhead 40. OPAL Co. uses the two-way variance analysis for overhead performance. The budgeted factory overhead includes monthly fixed costs of P1,200,000 plus variable costs of P96 per direct labor hour. Total standard direct labor hours allowed for the May, 19x8 production was 43,200 hours. Analysis showed that, in May, 19x8, the controllable variance of P24,000 is unfavorable while the volume variance of P12,000 is favorable. How much was the applied factory overhead in May 19x8? (M) a. P5,335,200 c. P5,359,200 b. P5,347,200 d. P5,371,200 RPCPA 0598 .

ITEM (y) a b Supplies $ 0.50 Indirect Labor $ 54,750 6.50 Depreciation -- Plant and Equipment 27,000 Property Taxes and Insurance 32,300 Repairs and Maintenance 14,550 1.25 Utilities 3,400 4.75 Total O/H $132,000 $13.00 Actual fixed O/H incurred was $133,250, and actual variable O/H was $1,225,000. Patie produced 23,500 equivalent units during the year using 98,700 direct machine hours.

The MABINI CANDY FACTORY has the following budgeted factory overhead costs: Budgeted fixed monthly factory overhead costs P85,000 Variable factory overhead P4.00 per direct labor hour For the month of January, the standard direct labor hours allowed were 25,000. An analysis of the factory overhead shows that in January, the factory had an unfavorable budget (controllable) variance of P3,500 and a favorable volume variance of P1,200. The factory uses a two-way analysis of factory overhead variances. The applied factory overhead in January was (M) a. P188,500 c. P186,200 b. P183,800 d. P103,500 RPCPA 0589

Comprehensive Questions 116 through 118 are based on the following information. L.J. McCarthy Patie Company uses a standard FIFO, process-cost system to account for its only product, Mituea. Patie has found that direct machine hours (DMH) provide the best estimate of the application of O/H. Four (4) standard direct machine hours are allowed for each unit. Using simple linear regression analysis in the form y = a + b(DMH), given that (A) equals fixed costs and (B) equals variable costs, Patie has developed the CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES 129

. What is the standard O/H rate? (M) A. $13.00 per DMH. B. $1.32 per DMH

STANDARD COSTS AND VARIANCE ANALYSIS A manufacturer of industrial equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 8,000 DLHs Overhead costs at the denominator activity level: Variable overhead cost $56,400 Fixed overhead cost $100,800 The following data pertain to operations for the most recent period: Actual hours 7,800 DLHs Standard hours allowed for the actual output 7,735 DLHs Actual total variable overhead cost $54,210 Actual total fixed overhead cost $100,200

C. $14.32 per DMH. D. $13.76 per DMH.

130

. How much O/H should be applied to production? (M) A. $1,413,384 C. $1,358,250 B. $1,432,000 D. $1,346,080

131

. What is the total O/H variance? (M) A. $12,170 unfavorable. B. $55,134 unfavorable.

C. $55,134 favorable. D. $73,750 favorable.

Predetermined Overhead Rate and Applied Overhead Questions 81 & 82 are based on the following information. G & N 9e A manufacturer of industrial equipment has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity ................. 3,900 MHs Overhead costs at the denominator activity level: Variable overhead cost ...................... $33,345 Fixed overhead cost ......................... $61,425 The following data pertain to operations for the most recent period: Actual hours 3,900 MHs Standard hours allowed for the actual output 3,952 MHs Actual total variable overhead cost $32,565 Actual total fixed overhead cost $60,675 81. What is the predetermined overhead rate to the nearest cent? (M) a. $23.91 c. $24.30 b. $24.30 d. $23.91 82. How much overhead was applied to products during the period to the nearest dollar? (M) a. $93,240 c. $96,034 b. $94,770 d. $94,770 Questions 83 & 84 are based on the following information. CMA EXAMINATION QUESTIONS

G & N 9e

83. What is the predetermined overhead rate to the nearest cent? (M) a. $19.30 c. $19.80 b. $19.65 d. $20.15 84. How much overhead was applied to products during the period to the nearest dollar? (M) a. $151,993 c. $157,200 b. $154,410 d. $153,270 THREE-WAY VARIANCE - CMA Spending Variance 132 . Cara Williams, a supervisor, controls her department's costs. The following data relate to her department for the month of June: Factory Overhead Budgeted Actual Variable $100,000 $106,250 Fixed 31,250 33,750 What was the department's total spending variance for June? (E) A. $8,750 U. C. $3,750 F. B. $6,250 U. D. $2,500 U. Gleim 70. Using the information presented below, calculate the total overhead spending variance. (E) Budgeted Actual Units produced 5,000 4,500 Page 61 of 171

MANAGEMENT ADVISORY SERVICES Variable overhead (2 DLH at P2 P4/ unit per DLH) Fixed overhead P10,000 Direct labor hours 10,000 A. P500 U C. P1,000 U B. P800 U D. P1,300 U 133

134

STANDARD COSTS AND VARIANCE ANALYSIS P19,500 P10,300 9,500 Pol Bobadilla

. The following information is available from the Tyro Company: Actual factory O/H $15,000 Fixed O/H expenses, actual $7,200 Fixed O/H expenses, budgeted $7,000 Actual hours 3,500 Standard hours 3,800 Variable O/H rate per DLH $2.50 Assuming that Tyro uses a three-way analysis of O/H variances, what is the spending variance? (E) a. $750 favorable. c. $950 favorable. b. $750 unfavorable. d. $200 unfavorable. AICPA 0578 I32 . Coleman Company compiled the following information: Actual factory overhead $22,500 Fixed overhead expenses, actual $10,800 Fixed overhead expenses, budgeted $10,500 Actual hours 5,250 Standard hours 5,700 Variable overhead rate per DLH $3.80 What is the spending variance assuming Coleman uses a three-way analysis of overhead? (E) A. $9,660 unfavorable. C. $7,950 favorable. B. $8,250 favorable. D. $7,950 unfavorable. Gleim

CMA EXAMINATION QUESTIONS

Variable Overhead Efficiency Variance 135 . The following information pertains to Roe Co.’s 2000 manufacturing operations: Standard direct manufacturing labor hours per unit 2 Actual direct manufacturing labor hours 10,500 Number of units produced 5,000 Standard variable overhead per standard direct labor hour $3 Actual variable overhead $28,000 Roe’s 2000 unfavorable variable overhead efficiency variance was (E) a. $0 c. $2,000 b. $1,500 d. $3,500 AICPA 1192 136

. The following data relate to Tray Co.'s manufacturing operations: Standard direct labor hours per unit 3 Actual direct labor hours 24,500 Number of units produced 8,000 Standard variable overhead per standard direct labor hour $2 Actual variable overhead $46,000 Tray's variable overhead efficiency variance is (E) A. $0 C. $2,000 F. B. $1,000 U. D. $3,000 F. Gleim

35. 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 (M) a. P3,000 Favorable c. P5,400 Favorable b. P3,000 Unfavorable d. P5,400 Unfavorable Pol Bobadilla Page 62 of 171

MANAGEMENT ADVISORY SERVICES Spending & Efficiency Variance Questions 1 and 2 are based on the following information. 137

138

. The following information relates to Department 1 of Ruiz Company for the fourth quarter. The total overhead variance is divided into three variances: spending, variable efficiency, and volume. Actual total overhead (fixed plus variable) $178,500 Budget formula $110,000+ $.50 per hour Total overhead application rate $1.50 per hour Actual hours worked 121,000 What was the spending variance in this department during the quarter? (E) A. $8,000 favorable C. $8,000 unfavorable B. $4,500 favorable D. $4,500 unfavorable Carter & Usry . The following information relates to Department 1 of Ruiz Company for the fourth quarter. The total overhead variance is divided into three variances: spending, variable efficiency, and volume. Actual total overhead (fixed plus variable) $178,500 Budget formula $110,000+ $.50 per hour Total overhead application rate $1.50 per hour Actual hours worked 121,000 What was the variable efficiency variance in this department during the quarter? A. $4,500 favorable C. $4,500 unfavorable B. $8,000 favorable D. $8,000 unfavorable Carter & Usry

Comprehensive Questions 1 thru 5 are based on the following information. Beebo Company uses a standard cost system as a means of control for their manufacturing business. The firm has done an analysis of its overhead cost behavior patterns relative to its activity base of direct labor hours (DLH), and reports the following findings: Variable overhead Indirect material $1.20 per DLH Indirect labor 2.15 per DLH Other indirect costs 3.45 per DLH CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Annual Fixed Costs Salaries $100,000 Depreciation 14,000 Rent 30,000 Beebo’s annual budget is based on total production of 240,000 units, for which 2.5 DLH per unit is required. It may be assumed that Beebo’s fixed costs and production activity occur evenly throughout the year. During its first month of operations in the current year Beebo produced 22,000 units, logged 57,200 direct labor hours,and reported the following cost figures. Actual variable overhead costs $360,000 Total fixed costs 14,000 .

Beebo’s predetermined overhead application rate is (M) A. $6.80 per DLH D. $9.40 per DLH B. $7.04 per DLH E. $9.76 per DLH C. $8.14 per DLH

.

Beebo’s overhead spending variance for the month is (M) A. $10,000 unfavorable. D. $28,688 favorable. B. $22,000 unfavorable. E. $40,688 favorable. C. $26,960 favorable.

.

Beebo’s overhead efficiency variance for the month is (M) A. $14,960 unfavorable. D. $48,960 favorable. B. $15,488 unfavorable. E. $50,688 favorable. C. $27,200 favorable.

.

Beebo’s overhead volume variance for the month is (M) A. $528 unfavorable. D. $34,000 favorable. B. $1,200 favorable. E. $35,200 favorable. C. $1,728 unfavorable.

.

Beebo’s overhead for the month was (M) A. Overapplied by $28,688 D. Overapplied by $14,960 B. Underapplied by $22,000 E. Underapplied by $34,000 C. Overapplied by $13,200 Page 63 of 171

MANAGEMENT ADVISORY SERVICES Questions 106 through 109 are based on the following information. RPCPA 1084 Standard costs and budgetary control methods must be closely related. This relationship is particularly applicable for factory overhead. A flexible budget allows better control over factory overhead than a fixed budget. The flexible budget for Sta. Maria Corporation is presented below: Percent of Normal Operating Capacity 80% 90% 100%* 110% Variable overhead P 72,000 P 81,000 P 90,000 P 99,000 Fixed overhead 45,000 45,000 45,000 45,000 Total factory P117,000 P126,000 P135,000 P144,000 overhead * Normal capacity In accordance with standards established, 90,000 units of product should be manufactured when the company operates its normal capacity. The standard labor time per unit of product is 20 minutes. Actual production in 1983 was 75,000 units of product in 24,000 hours.

STANDARD COSTS AND VARIANCE ANALYSIS *. What is the standard variable factory overhead rate per hour? (M) a. P1.00 c. P3.00 b. P2.00 d. P4.50 *. What is the budgeted factory overhead adjusted to standard hours allowed for units actually produced? (M) a. P112,500 c. P120,000 b. P117,000 d. P135,000 *. What is the budgeted factory overhead adjusted to actual hours worked. (M) a. P112,500 c. P120,000 b. P117,000 d. P135,000 *. What is the factory overhead applied to production (based on standard hours? (M) a. P112,500 c. P120,000 b. P117,000 d. P135,000 THREE-WAY VARIANCE – Spending, Idle Capacity & Efficiency Variance Idle Capacity Variance 23. Factory overhead for the Cabanatuan Co. has been estimated as follows: Fixed overhead P30,000 Variable overhead 90,000 Estimated direct labor hours 40,000 Production for the month reached 75% of the budget, and actual factory overhead totaled P86,000. The favorable (unfavorable) idle capacity variance was (E) a. P4,000 c. P7,500 b. (P7,500) d. None of the above RPCPA 1079 43. QUEEN Processing Co. has set its normal capacity at 24,000 hours for the current year. Fixed overhead was budgeted for P18,000 and variable overhead was budgeted for P72,000. If actual hours worked for the current year were 22,000, the idle capacity variance would be (E) a. P0 c. P6,000 b. P1,500 d. P7,500 RPCPA 1095

CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Comprehensive Questions 1 through 7 are based on the following information. RPCPA 0593 The U. R. Good Company manufactures a product, using standard costs as follows: 1. Standard costs per unit: Material - 7 kilos at P3.50 per kilo Labor - 8 hours at P1.75 per hour Overhead: Fixed - P1.15 per hour or P9.20 per unit Variable - P0.85 per hour or P6.80 per unit 2. Overhead applied on direct labor hours 3. Actual performance (one month) a) Volume produced - 800 b) Labor hours - 6,300 c) Overhead - P13,200 d) Material cost - P3.45 per kilo e) Labor cost - P1.80 per hour f) Material used - 4,800 kilos 1. Material price variance is (E) a. P 240 favorable. b. P2,800 unfavorable.

c. P240 unfavorable. d. P360 favorable.

2. Labor rate variance is (E) a. P400 favorable. b. P315 unfavorable.

c. P175 favorable. d. P500 unfavorable

3. Total material variance is (E) a. P2,800 favorable. b. P2,800 unfavorable.

c. P3,000 unfavorable. d. P3,040 favorable.

4. Total overhead variance is (E) a. P200 favorable. b. P500 favorable.

c. P400 unfavorable. d. P400 favorable.

CMA EXAMINATION QUESTIONS

5. Material quantity variance is (E) a. P200 favorable. b. P250 unfavorable.

c. P240 favorable. d. P2,800 favorable.

6. Overhead idle capacity variance is a. P435 favorable. b. P435 unfavorable.

c. P1,035 unfavorable. d. P1,035 favorable.

7. Overhead efficiency variance is a. P435 favorable. b. 200 favorable.

c. P435 unfavorable. d. 200 unfavorable.

FOUR-WAY VARIANCE Actual Variable Overhead Cost 139 . Roberts Corporation manufactured 100,000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February. Actual Budgeted Production 100,000 units 100,000 units Machine-hours 9,800 hours 10,000 hours Variable overhead cost per $5.25 $5.00 machine-hour What is the actual variable overhead cost? (E) a. $49,000 c. $51,450 b. $50,000 d. none of the above Horngren 140

. Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September. Actual Budgeted Production 30,000 units 24,000 units Machine-hours 15,000 hours 10,800 hours Variable overhead cost per $11.00 $11.25 machine-hour: What is the actual variable overhead cost? (E) a. $121,500 c. $165,000 b. $151,875 d. $168,750 Horngren Page 65 of 171

MANAGEMENT ADVISORY SERVICES Flexible Variable Budget (Based on Actual Output) *. Pranic Corp. uses flexible budgeting for cost control. It produced 5,400 units of product for the month just ended incurring an indirect materials cost of P26,000. Its master budget for the year showed an indirect materials cost of P360,000 at a production volume of 72,000 units. A flexible budget for the month’s production would show indirect material cost of (E) a. P27,000 c. P27,950 b. P26,000 d. P23,400 RPCPA 0597

STANDARD COSTS AND VARIANCE ANALYSIS Variable overhead cost per $5.25 $5.00 machine-hour What is the flexible-budget amount? (E) a. $49,000 c. $51,450 b. $50,000 d. none of the above Horngren 143

.

141

. RedRock Company uses flexible budgeting for cost control. RedRock produced 10,800 units of product during March, incurring an indirect materials cost of $13,000. Its master budget for the year reflected an indirect materials cost of $180,000 at a production volume of 144,000 units. A flexible budget for March production should reflect indirect materials costs of (E) a. $13,000 c. $13,975 b. $13,500 d. $11,700 CMA 1291 3-26

144

.

5. For the period just ended, LAMBDA Co. budgeted its variable overhead at P40 per direct labor hour and fixed overhead at P480,000. Budgeted production volume was 8,000 units and the production time, which was the basis for allocation of variable and fixed overhead, was budgeted at 0.80 hour per unit. The actual results for the period were: fixed overhead, P552,000; variable overhead, P283,480; units produced, 7,460; direct labor hours used, 5,595. What was the budgeted variable overhead for the actual volume attained? (M) a. P223,800 c. P238,720 b. P226,784 d. P283,480 RPCPA 1094 142

. Roberts Corporation manufactured 100,000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February. Actual Budgeted Production 100,000 units 100,000 units Machine-hours 9,800 hours 10,000 hours

CMA EXAMINATION QUESTIONS

Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September. Actual Budgeted Production 30,000 units 24,000 units Machine-hours 15,000 hours 10,800 hours Variable overhead cost per $11.00 $11.25 machine-hour: What is the flexible-budget amount? (E) a. $121,500 c. $165,000 b. $151,875 d. $168,750 Horngren White Corporation manufactures football jerseys and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data. Budgeted Actual Output units 20,000 18,000 Machine-hours 30,000 28,000 Variable manufacturing $360,000 $342,000 overhead costs What is the flexible-budget amount for variable manufacturing overhead? (E) a. $324,000 c. $380,000 b. $342, 000 d. none of the above Horngren

145

. Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data. Budgeted output units 15,000 units Budgeted machine-hours 5,000 hours Page 66 of 171

MANAGEMENT ADVISORY SERVICES Budgeted variable manufacturing overhead costs for 15,000 units $161,250 Actual output units produced 22,000 units Actual machine-hours used 7,200 hours Actual variable manufacturing overhead costs $242,000 What is the flexible-budget amount for variable manufacturing overhead? (E) a. $165,000 c. $242,000 b. $236,500 d. none of the above Horngren sss Variable Overhead Spending Variance 63. Derf Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000. The variable overhead spending variance for the period was: (M) A. $5,300 unfavorable. C. $6,300 unfavorable. B. $1,200 unfavorable. D. $6,500 unfavorable. G & N 10e 49. Barron Company has a standard variable costs as follows: Materials, 3 pounds at $4.00 per pound Labor, 2 hours at $10.00 per hour Variable overhead, $7.50 per labor hour

$12.00 20.00 15.00 $47.00 During September, Barron produced 5,000 units, using 9,640 labor hours at a total wage of $94,670 and incurring $78,600 in variable overhead. The variable overhead spending variance is (E) a. $6,300 unfavorable. c. $2,700 favorable. b. $3,600 unfavorable. d. Some other number. D, L & H 9e

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 101. The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labor hours. Data for the month of February include the following:  Variable manufacturing overhead cost incurred: $48,700  Total variable overhead variance: $300 F  Standard hours allowed for actual production: 7,000  Actual direct labor hours worked: 6,840 The variable overhead spending variance is: (E) a. $820 F. c. $740 F. b. $820 U. d. $740 U. G & N 9e 92.

146

Standard Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows: Standard costs per unit: Variable portion 2 hours @ $3 = $ 6 Fixed portion 2 hours @ $5 = 10 $16 During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to April:  Actual machine hours used were 165,000.  Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed).  All inventories are carried at standard cost. The variable overhead spending variance for April was (E) a. $15,000 U. c. $38,000 F. b. $23,000 U. d. $38,000 U. Barfield

. Ritz Production Company has the following information: Standard factory overhead rates are based on a normal monthly volume of 10,000 units (1 standard direct hour per unit). Standard factory overhead rates per direct labor hour are: Fixed $3.0 0 Variable 5.0 $8.00 0 Units actually produced in current month 9,000 Page 67 of 171

MANAGEMENT ADVISORY SERVICES Actual factory overhead costs incurred (includes $35,000 fixed) Actual direct labor hours

STANDARD COSTS AND VARIANCE ANALYSIS units $78,000 9,000 hours

What is the variable overhead spending variance for Ritz? (E) a. $43,000 (U) d. $5,000 (F) b. $0 e. $5,000 (U) c. $2,000 (F) 61.

King Company estimated that it would operate its manufacturing facilities at 800,000 direct labor hours for the year and this served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labor hour. The standard direct labor time was 3 direct labor hours per unit. The actual results for the year are presented below: Actual finished units 250,000 Actual direct labor hours 764,000 Actual variable overhead $1,610,000 Actual fixed overhead $ 392,000 The variable overhead spending variance for the year is: (E) a. $2,000 F. c. $82,000 U. b. $10,000 U. d. $110,000 U. AICPA, Adapted

147

. Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours. Each unit requires two standard hours of labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was $3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below:

Actual production 198,000 Units Actual direct labor-hours 440,000 direct labor-hours Actual variable overhead $352,000 Actual fixed overhead $575,000 Franklin's variable overhead spending variance for the year is (M) A. $20,000 unfavorable. C. $22,000 unfavorable. B. $19,800 favorable. D. $20,000 favorable. CMA 1290 3-7 31. Tyro Company has a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labor hours (DLHs). The following information is available: Actual total overhead costs $15,000 Actual fixed overhead costs $ 7,200 Budgeted fixed overhead costs $ 7,000 Actual hours worked 3,500 DLHs Standard hours allowed for the output 3,800 DLHs Variable overhead rate $2.50 per DLH Based on these data, what is the variable overhead spending variance? (E) a. $1,700 favorable. c. $950 favorable. b. $750 unfavorable. d. $1,500 unfavorable. AICPA, Adapted 53. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 1.2 hours Standard variable overhead rate $19.80 per hour The following data pertain to operations for the last month: Actual hours 2,100 hours Actual total variable overhead cost $40,740 Actual output 1,600 units What is the variable overhead spending variance for the month? (E) A. $2,724 U C. $840 F B. $3,492 U D. $768 U G & N 10e 98. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 1.6 hours

CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Standard variable overhead rate $11.55 per hour The following data pertain to operations for the last month: Actual hours 4,900 hours Actual total variable overhead cost $58,310 Actual output 3,000 units What is the variable overhead spending variance for the month? (E) a. $2,870 U c. $1,715 U b. $2,870 F d. $1,715 F G & N 9e

Standard variable overhead rate $11.35 per hour The following data pertain to operations for the last month: Actual hours 7,500 hours Actual total variable overhead cost $87,000 Actual output 1,000 units What is the variable overhead spending variance for the month? (E) A. $7,550 F C. $1,875 F B. $7,550 U D. $1,875 U G & N 10e

74. A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses direct labor-hours (DLHs) as its measure of activity. Standard hours per unit of output 3.6 DLHs Standard variable overhead rate $15.35 per DLH The following data pertain to operations for the last month: Actual direct labor-hours 7,300 DLHs Actual total variable overhead cost $112,785 Actual output 1,800 units What is the variable overhead spending variance for the month? (E) A. $13,317 U C. $730 F B. $730 U D. $13,317 F G & N 10e

67. A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses direct labor-hours (DLHs) as its measure of activity. Standard hours per unit of output 7.2 DLHs Standard variable overhead rate $14.20 per DLH The following data pertain to operations for the last month: Actual direct labor-hours 5,100 DLHs Actual total variable overhead cost $72,165 Actual output 600 units What is the variable overhead spending variance for the month?(E) a. $10,821 U c. $10,821 F b. $255 U d. $255 F G & N 9e

56. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 5.6 hours Standard variable overhead rate $12.00 per hour The following data pertain to operations for the last month: Actual hours 2,600 hours Actual total variable overhead cost $31,330 Actual output 400 units What is the variable overhead spending variance for the month? (E) a. $112 F c. $4,450 U b. $130 U d. $4,338 U G & N 9e

65. A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses machine-hours as its measure of activity. Standard hours per unit of output 8.1 machine-hours Standard variable overhead rate $14.30 per machine-hour The following data pertain to operations for the last month: Actual hours 1,700 machine-hours Actual total variable overhead cost $24,905 Actual output 200 units What is the variable overhead spending variance for the month? (E) a. $1,739 U c. $595 U b. $595 F d. $1,739 F G & N 9e

91. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 7.0 hours CMA EXAMINATION QUESTIONS

89. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Page 69 of 171

MANAGEMENT ADVISORY SERVICES Standard hours per unit of output 8.1 hours Standard variable overhead rate $14.85 per hour The following data pertain to operations for the last month: Actual hours 8,600 hours Actual total variable overhead cost $130,720 Actual output 1,000 units What is the variable overhead spending variance for the month? (E) A. $3,010 F C. $10,435 U B. $3,010 U D. $10,435 F G & N 10e 50.

49.

A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,700 DLHs Overhead costs at the denominator activity level: Variable overhead cost $28,490 Fixed overhead cost $47,545 The following data pertain to operations for the most recent period: Actual hours 3,900 DLHs Standard hours allowed for the actual output 3,850 DLHs Actual total variable overhead cost $29,445 Actual total fixed overhead cost $47,995 What was the variable overhead spending variance for the period to the nearest dollar? (E) A. $585 U C. $955 U B. $585 F D. $955 F G & N 10e A manufacturing company has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,100 MHs Overhead costs at the denominator activity level: Variable overhead cost $35,075 Fixed overhead cost $77,775 The following data pertain to operations for the most recent period: Actual hours 6,300 MHs Standard hours allowed for the actual output 5,994 MHs

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Actual total variable overhead cost $36,540 Actual total fixed overhead cost $76,875 What was the variable overhead spending variance for the period to the nearest dollar? (E) a. $315 U c. $1,465 U b. $1,465 F d. $315 F G & N 9e 57.

The Ferris Company applies manufacturing overhead costs to products on the basis of direct labor hours. The standard cost card shows that 3 direct labor hours are required per unit of product. For August, the company budgeted to work 90,000 direct labor hours and to incur the following total manufacturing overhead costs: Total variable overhead costs $ 99,000 Total fixed overhead costs $118,800 During August, the company completed 28,000 units of product, worked 86,000 direct labor hours, and incurred the following total manufacturing overhead costs: Total variable overhead costs $ 98,900 Total fixed overhead costs $115,300 The denominator activity in the predetermined overhead rate is 90,000 direct labor hours. For August, the variable overhead spending variance is: (E) a. $4,300 F. c. $6,500 F. b. $4,300 U. d. $6,500 U. G & N 9e

57.

The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on a basis of machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: Variable overhead costs (total): Maintenance $36,000 Utilities $20,000 Fixed overhead costs (total): Supervision $24,000 Depreciation $16,00 Page 70 of 171

MANAGEMENT ADVISORY SERVICES During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: Variable overhead costs (total): Maintenance $43,420 Utilities $32,510 Fixed overhead costs (total): Supervision $26,970 Depreciation $16,000 The standard time allowed to complete one unit of product is 3.6 machinehours. The variable overhead spending variance for maintenance cost for November was: A. $7,420 unfavorable. C. $9,820 unfavorable. B. $2,400 favorable. D. $5,620 unfavorable. G & N 10e 72. Able Control Company, which manufactures electrical switches, uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of direct labor-hours (DLHs). The standard overhead costs are shown below: Variable overhead (5 DLHs @ $8.00 per DLH) $40 Fixed overhead (5 DLHs @ $12.00* per DLH) $60 *Based on 300,000 DLHs per month. The following information is available for the month of October:  Plans had called for the production of 60,000 switches.  56,000 switches were actually produced.  275,000 direct labor-hours were worked at a total cost of $2,550,000.  Actual variable overhead costs were $2,340,000.  Actual fixed overhead costs were $3,750,000. The variable overhead spending variance for October was: (E) A. $60,000 Favorable. C. $100,000 Unfavorable. B. $110,000 Unfavorable. D. $140,000 Unfavorable. G & N 10e 69. Raff Co. has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor hours (DLHs). The following standards are based on 100,000 direct labor hours: Variable overhead 2 DLHs @ $3 per DLH = $6 per unit Fixed overhead 2 DLHs @ $4 per DLH = $8 per unit CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS The following information pertains to operations during March: Units actually produced 38,000 Actual direct labor hours worked 80,000 Actual manufacturing overhead incurred: Variable overhead $250,000 Fixed overhead $384,000 For March, the variable overhead spending variance was: (E) a. $6,000 F. c. $12,000 U. b. $10,000 U. d. $22,000 F. AICPA, Adapted 81. The following data are the actual results for Roadtrek Co. for October: Actual output 9,000 cases Actual variable overhead P405,000 Actual fixed overhead P122,000 Actual machine time 40,500 machine hours Standard cost and budget information for Roadtrek Company follows: Standard variable overhead rate P9.00 per MH Standard quantity of machine hours 4 hours per case Budgeted fixed overhead P1,440,000 per year Budgeted output 10,000 cases per month The variable overhead spending variance for the month of October is (E) A. P40,500 U C. P45,000 U B. P81,000 U D. P81,000 F Pol Bobadilla 148

. Roberts Corporation manufactured 100,000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February. Actual Budgeted Production 100,000 units 100,000 units Machine-hours 9,800 hours 10,000 hours Variable overhead cost per $5.25 $5.00 machine-hour What is the variable overhead spending variance? (E) a. $1,000 favorable c. $2,450 unfavorable b. $1,450 unfavorable d. none of the above Horngren

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MANAGEMENT ADVISORY SERVICES 149

. Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September. Actual Budgeted Production 30,000 units 24,000 units Machine-hours 15,000 hours 10,800 hours Variable overhead cost per $11.00 $11.25 machine-hour: What is the variable overhead spending variance? (E) a. $3,750 favorable c. $13,125 unfavorable b. $16,875 unfavorable d. $30,375 unfavorable Horngren

67. The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for the year: Actual Budgeted Units produced 33,000 30,000 Direct labor-hours 157,500 150,000* Variable overhead costs $136,500 $120,000 Fixed overhead costs $ 78,000 $ 75,000 *Represents the denominator activity. The variable overhead spending variance was: (E) A. $4,500 U. C. $13,500 U. B. $10,500 U. D. $16,500 U. G & N 10e 53.

The Dillon Company makes and sells a single product and uses a flexible budget for overhead to plan and control overhead costs. Overhead costs are applied on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit. The Dillon Company had the following budgeted and actual data for March: Actual Budgeted Units produced 33,900 30,800 Direct labor-hours 161,800 154,000 Variable overhead $140,500 $123,200

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS costs Fixed overhead costs $80,000 The variable overhead spending variance for March is: (E) a. $4,900 U. c. $14,700 U. b. $11,060 U. d. $17,300 U.

$77,000 G & N 9e

59. The Phelps Company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: Actual Budgeted Units produced 22,000 20,000 Direct labor-hours 105,000 100,000* Variable overhead $91,000 $80,000 costs Fixed overhead costs $52,000 $50,000 *Represents the denominator activity for the month. The variable overhead spending variance for March is: (E) A. $ 7,000 unfavorable. C. $13,000 unfavorable. B. $ 9,000 unfavorable. D. $11,000 unfavorable. G & N 10e 33. Baltimore, Inc. analyzes manufacturing overhead in the production of its only one product, Blu. The following set of information applies to the month of May, 2003: Budgeted Actual Units produced 40,000 38,000 Variable manufacturing overhead P4/DLH P16,400 Fixed manufacturing overhead P20/DLH P88,000 Direct labor hours 6 4,200 hours minutes/unit How much was the variable overhead spending variance? (E) A. P400 Favorable C. P1,200 Favorable B. P400 Unfavorable D. P1,200 Unfavorable Pol Bobadilla

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MANAGEMENT ADVISORY SERVICES 10. The Huber Company produces a pesticide. At the beginning of the year, Huber had the following standard cost sheet: Direct materials (5 lbs. @ P11.60) P 80.00 Direct labor (1.5 hrs @ P90.00) 135.00 Fixed overhead (1.5 hrs @ P20.00) 30.00 Variable overhead (1.5 hrs. @ P15.00) 22.50 Standard cost per unit P267.50 The Huber Company computes its overhead rates using practical volume, which is 36,000 units. The actual results for the year are:  Units produced, 35,000 units.  Materials purchased, 186,000 pounds @ P15.  Materials used, 180,000 pounds.  Direct labor, 53,000 hours @ P89.50  Fixed overhead, P725,000.  Variable overhead, P802,500 The amount of variable overhead spending variance is: (E) A. P15,000 U C. P15,000 F B. P7,500 U D. P7,500 F Pol Bobadilla Standard Variable Overhead Rate 30. At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine-hours. The performance report for July showed that actual maintenance costs totaled $9,800 and that the associated spending variance was $200 unfavorable. If 8,000 machine-hours were actually worked during July, the budgeted maintenance cost per machinehour was: (M) a. $1.20. c. $1.275. b. $1.25. d. $1.225. G & N 9e

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 28. At Eady Company, maintenance is a variable cost that varies directly with machine-hours. The performance report for July showed that actual maintenance costs totaled $8,650 and that the associated spending variance was $250 unfavorable. If 5,000 machine-hours were actually worked during July, the budgeted maintenance cost per machine-hour was: (M) A. $1.73. C. $1.68. B. $1.78. D. $1.83. G & N 10e 29.

At Jacobson Company, indirect labor is a variable cost that varies with direct labor hours. Last month's performance report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance was $245 F. If 24,100 direct labor hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor hour): (M) a. $0.20. c. $0.30. b. $0.25. d. $0.35. G & N 9e eee Variable Overhead Efficiency Variance 150 . Gem Company’s standard variable overhead rate is $3 per direct labor hour, and each unit requires 2 standard direct labor hours. During October, Gem recorded 12,000 actual direct labor hours, $37,000 actual variable overhead costs, and 5,800 units of product manufactured. What is the variable overhead efficiency variance for October for Gem? (E) a. $2,200 (U) d. $1,200 (U) b. $2,200 (F) e. $1,000 (U) c. $600 (U) H&M

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MANAGEMENT ADVISORY SERVICES 64. Derf Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000. The variable overhead efficiency variance for the period was: (M) A. $5,300 unfavorable. C. $1,500 unfavorable. B. $1,200 unfavorable. D. $6,500 unfavorable. G & N 10e 102. The Upton Company employs a standard costing system in which variable overhead is assigned to production on the basis of direct labor hours. Data for the month of February include the following:  Variable manufacturing overhead cost incurred: $48,700  Total variable overhead variance: $300 F  Standard hours allowed for actual production: 7,000  Actual direct labor hours worked: 6,840 The variable overhead efficiency variance is: (E) a. $430 U. c. $1,120 F. b. $740 F. d. $950 U. G & N 9e 62.

King Company estimated that it would operate its manufacturing facilities at 800,000 direct labor hours for the year and this served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labor hour. The standard direct labor time was 3 direct labor hours per unit. The actual results for the year are presented below: Actual finished units 250,000 Actual direct labor hours 764,000 Actual variable overhead $1,610,000 Actual fixed overhead $ 392,000 The variable overhead efficiency variance for the year is: (E) a. $28,000 U. c. $100,000 F.

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS b. $100,000 U.

d. $28,000 F.

AICPA, Adapted

151

. Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours. Each unit requires two standard hours of labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was $3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: Actual production 198,000 Units Actual direct labor-hours 440,000 direct labor-hours Actual variable overhead $352,000 Actual fixed overhead $575,000 Franklin's variable overhead efficiency variance for the year is (M) A. $33,000 unfavorable. C. $66,000 unfavorable. B. $35,520 favorable. D. $33,000 favorable. CMA 1290 3-6

152

. Compute the variable efficiency variance, using the following data: (E) Standard labor hours per good unit produced 2 Good units produced 1,000 Actual labor hours used 2,100 Standard variable overhead per standard labor hour $3 Actual variable overhead $6,500 A. $200 favorable C. $300 favorable B. $200 unfavorable D. $300 unfavorable CIA adapted

49. Barron Company has a standard variable costs as follows: Materials, 3 pounds at $4.00 per pound Labor, 2 hours at $10.00 per hour Variable overhead, $7.50 per labor hour

$12.00 20.00 15.00 $47.00 During September, Barron produced 5,000 units, using 9,640 labor hours at a total wage of $94,670 and incurring $78,600 in variable overhead. The variable overhead efficiency variance is (E) a. $6,300 unfavorable. c. $2,700 favorable. b. $3,600 unfavorable. d. Some other number. D, L & H 9e Page 74 of 171

MANAGEMENT ADVISORY SERVICES 93.

Standard Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows: Standard costs per unit: Variable portion 2 hours @ $3 = $ 6 Fixed portion 2 hours @ $5 = 10 $16 During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to April:  Actual machine hours used were 165,000.  Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed).  All inventories are carried at standard cost. The variable overhead efficiency variance for April was (E) a. $15,000 U. c. $38,000 F. b. $23,000 U. d. $38,000 U. Barfield

99. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output ...... 1.6 hours Standard variable overhead rate ........ $11.55 per hour The following data pertain to operations for the last month: Actual hours ........................... 4,900 hours Actual total variable overhead cost .... $58,310 Actual output .......................... 3,000 units What is the variable overhead efficiency variance for the month? (E) a. $1,680 F c. $1,155 U b. $1,190 U d. $1,190 F G & N 9e

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 52. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 3.5 hours Standard variable overhead rate $15.20 per hour The following data pertain to operations for the last month: Actual hours 3,800 hours Actual total variable overhead cost $59,090 Actual output 800 units What is the variable overhead efficiency variance for the month? (E) A. $15,550 U C. $16,530 U B. $15,200 U D. $980 F G & N 10e 92. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 7.0 hours Standard variable overhead rate $11.35 per hour The following data pertain to operations for the last month: Actual hours 7,500 hours Actual total variable overhead cost $87,000 Actual output 1,000 units What is the variable overhead efficiency variance for the month? (E) A. $5,800 F C. $1,750 F B. $5,800 U D. $5,675 U G & N 10e 75. A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses direct labor-hours (DLHs) as its measure of activity.

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MANAGEMENT ADVISORY SERVICES Standard hours per unit of output 3.6 DLHs Standard variable overhead rate $15.35 per DLH The following data pertain to operations for the last month: Actual direct labor-hours 7,300 DLHs Actual total variable overhead cost $112,785 Actual output 1,800 units What is the variable overhead efficiency variance for the month? (E) A. $12,669 F C. $12,669 U B. $648 F D. $12,587 U G & N 10e 68.

A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses direct labor-hours (DLHs) as its measure of activity. Standard hours per unit of output 7.2 DLHs Standard variable overhead rate $14.20 per DLH The following data pertain to operations for the last month: Actual direct labor-hours 5,100 DLHs Actual total variable overhead cost $72,165 Actual output 600 units What is the variable overhead efficiency variance for the month?(E) a. $11,076 U c. $11,037 U b. $11,037 F d. $216 U G & N 9e

55. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 7.8 hours Standard variable overhead rate $12.55 per hour The following data pertain to operations for the last month: Actual hours 2,900 hours Actual total variable overhead cost $36,975 Actual output 200 units What is the variable overhead efficiency variance for the month? (E) a. $17,397 U c. $312 F b. $16,817 U d. $17,085 U G & N 9e

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 66. A manufacturing company that has only one product has established the following standards for its variable manufacturing overhead. The company uses machine-hours as its measure of activity. Standard hours per unit of output 8.1 machine-hours Standard variable overhead rate $14.30 per machine-hour The following data pertain to operations for the last month: Actual hours 1,700 machine-hours Actual total variable overhead cost $24,905 Actual output 200 units What is the variable overhead efficiency variance for the month? (E) a. $1,172 F c. $1,172 U b. $567 F d. $1,144 U G & N 9e 90. The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 8.1 hours Standard variable overhead rate $14.85 per hour The following data pertain to operations for the last month: Actual hours 8,600 hours Actual total variable overhead cost $130,720 Actual output 1,000 units What is the variable overhead efficiency variance for the month? (E) A. $7,600 F C. $7,600 U B. $2,835 F D. $7,425 U G & N 10e 58.

The Ferris Company applies manufacturing overhead costs to products on the basis of direct labor hours. The standard cost card shows that 3 direct labor hours are required per unit of product. For August, the company budgeted to work 90,000 direct labor hours and to incur the following total manufacturing overhead costs: Total variable overhead costs $ 99,000 Total fixed overhead costs $118,800 During August, the company completed 28,000 units of product, worked 86,000 direct labor hours, and incurred the following total manufacturing overhead costs: Total variable overhead costs $ 98,900 Total fixed overhead costs $115,300 Page 76 of 171

MANAGEMENT ADVISORY SERVICES The denominator activity in the predetermined overhead rate is 90,000 direct labor hours. For August, the variable overhead efficiency variance is: (E) a. $1,800 F. c. $2,200 U. b. $0. d. $2,200 F. G & N 9e 51.

50.

A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,700 DLHs Overhead costs at the denominator activity level: Variable overhead cost $28,490 Fixed overhead cost $47,545 The following data pertain to operations for the most recent period: Actual hours 3,900 DLHs Standard hours allowed for the actual output 3,850 DLHs Actual total variable overhead cost $29,445 Actual total fixed overhead cost $47,995 What was the variable overhead efficiency variance for the period to the nearest dollar? (E) A. $578 U C. $378 U B. $385 U D. $955 U G & N 10e A manufacturing company has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,100 MHs Overhead costs at the denominator activity level: Variable overhead cost $35,075 Fixed overhead cost $77,775 The following data pertain to operations for the most recent period: Actual hours 6,300 MHs Standard hours allowed for the actual output 5,994 MHs Actual total variable overhead cost $36,540 Actual total fixed overhead cost $76,875 What was the variable overhead efficiency variance for the period to the nearest dollar? (E)

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS a. $300 F b. $1,465 U

c. $1,760 U d. $1,775 U

G & N 9e

82. The following data are the actual results for Roadtrek Co. for October: Actual output 9,000 cases Actual variable overhead P405,000 Actual fixed overhead P122,000 Actual machine time 40,500 machine hours Standard cost and budget information for Roadtrek Company follows: Standard variable overhead rate P9.00 per MH Standard quantity of machine hours 4 hours per case Budgeted fixed overhead P1,440,000 per year Budgeted output 10,000 cases per month The overhead efficiency variance is (E) A. P4,500 U C. P4,500 F B. P40,500 U D. P40,500 F Pol Bobadilla 153

. Smith Corporation uses a standard cost system. Information for the month of April is as follows: Actual manufacturing overhead costs (13,000 is fixed) $40,000 Direct labor: Actual hours worked 12,000 hrs. Standard hours allowed 10,000 hrs. Average actual labor cost per hour $9 Standard cost data at 12,000 direct labor hours was: Variable factory overhead $24,000 Fixed factory overhead 12,000 Total factory overhead $36,000 The factory overhead rate is based on a normal volume of 12,000 direct labor hours. What is the variable overhead efficiency variance for Smith? (E) a. $1,000 (U) d. $10,000 (U) b. $4,000 (U) e. $3,000 (U) c. $2,000 (U) H&M

56.

The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on a basis of Page 77 of 171

MANAGEMENT ADVISORY SERVICES machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: Variable overhead costs (total): Maintenance $36,000 Utilities $20,000 Fixed overhead costs (total): Supervision $24,000 Depreciation $16,00 During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: Variable overhead costs (total): Maintenance $43,420 Utilities $32,510 Fixed overhead costs (total): Supervision $26,970 Depreciation $16,000 The standard time allowed to complete one unit of product is 3.6 machinehours. The variable overhead efficiency variance for utilities cost for November was: A. $2,760 favorable. C. $3,760 favorable. B. $3,760 unfavorable. D. $1,000 favorable. G & N 10e .

Meldouville Company has just finished reviewing the results of its operations for the current period. The company’s chief accountant told management that the total overhead spending variance was unfavorable by $1,000. However, the variable overhead portion of this variance was favorable by $200. The company’s volume variance, according to the accountant, was favorable by $300. During the period Medouville applied $1,800 of fixed overhead to production. The adjustment at the end of the period to allocate under-or-overapplied overhead included a debit of $200 to the Factory Overhead Control account. Meldouville’s overhead efficiency variance for the period was (M) A. $500 favorable. C. $1,500 favorable. B. $1,100 favorable. D. $500 unfavorable. Flamholtz & Diamond

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 11. The Huber Company produces a pesticide. At the beginning of the year, Huber had the following standard cost sheet: Direct materials (5 lbs. @ P11.60) P 80.00 Direct labor (1.5 hrs @ P90.00) 135.00 Fixed overhead (1.5 hrs @ P20.00) 30.00 Variable overhead (1.5 hrs. @ P15.00) 22.50 Standard cost per unit P267.50 The Huber Company computes its overhead rates using practical volume, which is 36,000 units. The actual results for the year are:  Units produced, 35,000 units.  Materials purchased, 186,000 pounds @ P15.  Materials used, 180,000 pounds.  Direct labor, 53,000 hours @ P89.50  Fixed overhead, P725,000.  Variable overhead, P802,500 The amount of variable overhead efficiency variance is (E) A. P7,500 F C. P7,500 U B. P15,000 F D. P15,000 U Pol Bobadilla 73. Able Control Company, which manufactures electrical switches, uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of direct labor-hours (DLHs). The standard overhead costs are shown below:

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MANAGEMENT ADVISORY SERVICES Variable overhead (5 DLHs @ $8.00 per DLH) $40 Fixed overhead (5 DLHs @ $12.00* per DLH) $60 *Based on 300,000 DLHs per month. The following information is available for the month of October:  Plans had called for the production of 60,000 switches.  56,000 switches were actually produced.  275,000 direct labor-hours were worked at a total cost of $2,550,000.  Actual variable overhead costs were $2,340,000.  Actual fixed overhead costs were $3,750,000. The variable overhead efficiency variance for October was: (E) A. $40,000 Favorable. C. $160,000 Unfavorable. B. $60,000 Favorable. D. $210,000 Unfavorable. G & N 10e 154

155

. Roberts Corporation manufactured 100,000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February. Actual Budgeted Production 100,000 units 100,000 units Machine-hours 9,800 hours 10,000 hours Variable overhead cost per $5.25 $5.00 machine-hour What is the variable overhead efficiency variance? (E) a. $1,000 favorable c. $2,450 unfavorable b. $1,450 unfavorable d. none of the above Horngren . Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September. Actual Budgeted Production 30,000 units 24,000 units Machine-hours 15,000 hours 10,800 hours Variable overhead cost per $11.00 $11.25 machine-hour: What is the variable overhead efficiency variance? (E) a. $3,750 favorable c. $13,125 unfavorable b. $16,875 unfavorable d. $30,375 unfavorable Horngren

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 54.

The Dillon Company makes and sells a single product and uses a flexible budget for overhead to plan and control overhead costs. Overhead costs are applied on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit. The Dillon Company had the following budgeted and actual data for March: Actual Budgeted Units produced 33,900 30,800 Direct labor-hours 161,800 154,000 Variable overhead $140,500 $123,200 costs Fixed overhead costs $80,000 $77,000 The variable overhead efficiency variance for March is: (E) a. $12,400 F. c. $12,400 U. b. $6,160 U. d. $6,160 F. G & N 9e

60. The Phelps Company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: Actual Budgeted Units produced 22,000 20,000 Direct labor-hours 105,000 100,000* Variable overhead $91,000 $80,000 costs Fixed overhead costs $52,000 $50,000 *Represents the denominator activity for the month. The variable overhead efficiency variance for March is: (E) A. $8,000 unfavorable. C. $8,000 unfavorable. B. $4,000 favorable. D. $4,000 unfavorable. G & N 10e 68. The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for the year: Page 79 of 171

MANAGEMENT ADVISORY SERVICES Actual Units produced 33,000 Direct labor-hours 157,500 Variable overhead costs $136,500 Fixed overhead costs $ 78,000 *Represents the denominator activity. The variable overhead efficiency variance was: (E) A. $6,000 U. C. $12,000 U. B. $6,000 F. D. $12,000 F.

STANDARD COSTS AND VARIANCE ANALYSIS Flexible-budget amount for variable manufacturing overhead$9,000 Variable manufacturing overhead efficiency variance$180 unfavorable What is the variable overhead spending variance? (E) a. $420 unfavorable c. $600 unfavorable b. $600 favorable d. $780 favorable Horngren

Budgeted 30,000 150,000* $120,000 $ 75,000

G & N 10e

Actual Direct Labor Hours 65. The following information relates to Orc Company’s 2003 manufacturing activities: Standard direct labor hours per unit 2 Number of units produced 5,000 Standard variable overhead per standard direct labor hours P3 Actual variable overhead P28,000 Unfavorable overhead efficiency variance P1,500 The number of actual direct labor hours are (M) A. 10,500 C. 11,000 B. 10,000 D. Indeterminate Pol Bobadilla Variable Overhead Spending Variance 156 . Kellar Corporation manufactured 1,500 chairs during June. The following variable overhead data pertain to June. Budgeted variable overhead cost per unit $ 12.00 Actual variable manufacturing overhead cost $16,800 Flexible-budget amount for variable manufacturing overhead$18,000 Variable manufacturing overhead efficiency variance$360 unfavorable What is the variable overhead spending variance? (E) a. $840 unfavorable c. $1,200 unfavorable b. $1,200 favorable d. $1,560 favorable Horngren 157

. Patel Corporation manufactured 1,000 coolers during October. The following variable overhead data pertain to October. Budgeted variable overhead cost per unit $ 9.00 Actual variable manufacturing overhead cost $8,400 CMA EXAMINATION QUESTIONS

Flexible Budget Variance 158 . Kellar Corporation manufactured 1,500 chairs during June. The following variable overhead data pertain to June. Budgeted variable overhead cost per unit $ 12.00 Actual variable manufacturing overhead cost $16,800 Flexible-budget amount for variable manufacturing overhead$18,000 Variable manufacturing overhead efficiency variance$360 unfavorable What is the variable overhead flexible-budget variance? (E) a. $1,200 favorable c. $1,560 favorable b. $360 unfavorable d. $1,200 unfavorable Horngren 159

. Patel Corporation manufactured 1,000 coolers during October. The following variable overhead data pertain to October. Budgeted variable overhead cost per unit $ 9.00 Actual variable manufacturing overhead cost $8,400 Flexible-budget amount for variable manufacturing overhead $9,000 Variable manufacturing overhead efficiency variance$180 unfavorable What is the variable overhead flexible-budget variance? (E) a. $600 favorable c. $780 favorable b. $420 unfavorable d. $600 unfavorable Horngren

Variable Overhead Volume Variance 85. The following data are the actual results for Roadtrek Co. for October: Actual output 9,000 cases Actual variable overhead P405,000 Actual fixed overhead P122,000 Actual machine time 40,500 machine hours Standard cost and budget information for Roadtrek Company follows: Standard variable overhead rate P9.00 per MH Standard quantity of machine hours 4 hours per case Budgeted fixed overhead P1,440,000 per year Page 80 of 171

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Budgeted output 10,000 cases per month The amount of variable overhead volume variance is (M) A. Zero. C. P12,000 F B. P9,000 U D. P2,250 U Pol Bobadilla Variable Overhead Flexible Budget Variance 160 . A company's flexible budget shows an expected variable delivery expense of $160,000 when sales are 50,000 units. If sales total 52,000 units, and the actual delivery expense is $163,000, what will be the flexible budget variance for delivery expense? (E) A. $3,000 unfavorable. C. $3,000 favorable. B. $3,400 unfavorable. D. $3,400 favorable. Gleim 161

. Baxter Corporation's master budget calls for the production of 5,000 units of product monthly. The master budget includes indirect labor of $144,000 annually; Baxter 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 $10,100 were incurred. A performance report utilizing flexible budgeting would report a budget variance for indirect labor of (M) A. $1,900 unfavorable. C. $1,900 favorable. B. $700 favorable. D. $700 unfavorable. CMA 0687 4-18

162

. Gem Company’s standard variable overhead rate is $3 per direct labor hour, and each unit requires 2 standard direct labor hours. During October, Gem recorded 12,000 actual direct labor hours, $37,000 actual variable overhead costs, and 5,800 units of product manufactured. What is the total variable overhead budget variance for October for Gem? (E) a. $1,200 (U) d. $2,200 (F) b. $600 (U) e. $2,200 (U) c. $1,000 (U) H&M

49. Barron Company has a standard variable costs as follows: Materials, 3 pounds at $4.00 per pound Labor, 2 hours at $10.00 per hour Variable overhead, $7.50 per labor hour CMA EXAMINATION QUESTIONS

$12.00 20.00 15.00 $47.00

During September, Barron produced 5,000 units, using 9,640 labor hours at a total wage of $94,670 and incurring $78,600 in variable overhead. The variable overhead budget variance is (E) a. $6,300 unfavorable. c. $2,700 favorable. b. $3,600 unfavorable. d. Some other number. D, L & H 9e 163

. Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data. Budgeted Actual Output units 15,000 units 22,000 units Machine-hours 5,000 hours 7,200 hours Variable manufacturing $161,250 $242,000 overhead costs What is the flexible-budget variance for variable manufacturing overhead? (E) a. $5,500 favorable c. $4,300 favorable b. $5,500 unfavorable d. none of the above Horngren

164

.

White Corporation manufactures football jerseys and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data. Budgeted Actual Output units 20,000 18,000 Machine-hours 30,000 28,000 Variable manufacturing $360,000 $342,000 overhead costs What is the flexible-budget variance for variable manufacturing overhead? (E) a. $18,000 favorable c. zero b. $18,000 unfavorable d. none of the above Horngren

Standard Hours

Page 81 of 171

MANAGEMENT ADVISORY SERVICES 54. The Waters Company has a standard costing system. Variable manufacturing overhead is assigned to production on the basis of machine hours. The following data are available for July:  Actual variable manufacturing overhead cost incurred: $45,240  Actual machine hours worked: 3,200  Variable overhead spending variance: $6,840 unfavorable  Total variable overhead variance: $9,240 unfavorable The standard number of machine hours allowed for July production is: (M) A. 3,200 hours. C. 3,400 hours. B. 3,000 hours. D. 4,540 hours. G & N 10e Variable Overhead Spending Variance . Given for the variable factory overhead of GHI Products, Inc.: P39,500 actual input at budgeted rate, P41,500 flexible budget based on standard input allowed for actual output, P2,500 favorable flexible budget variance. Compute the spending variance. (M) a. P500 unfavorable. c. P500 favorable. b. P2,000 favorable. d. P2,000 unfavorable. RPCPA 1001 94. The Richie Company employs a standard costing system in which variable manufacturing overhead is assigned to production on a basis of number of machine setups. Data for the month of October include the following:  Variable manufacturing overhead cost incurred: $42,750  Total variable overhead variance: $5,430 favorable  Standard machine setups allowed for actual production: 2,920 setups  Actual machine setups incurred: 2,850 setups The variable overhead spending variance is: (M) A. $4,275 favorable. C. $1,050 unfavorable. B. $4,275 unfavorable. D. $1,050 favorable. G & N 10e Standard Variable Overhead Rate 93. The Richie Company employs a standard costing system in which variable manufacturing overhead is assigned to production on a basis of number of machine setups. Data for the month of October include the following:  Variable manufacturing overhead cost incurred: $42,750  Total variable overhead variance: $5,430 favorable CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS  Standard machine setups allowed for actual production: 2,920 setups  Actual machine setups incurred: 2,850 setups The standard variable overhead rate per machine setup is: (M) A. $16.91. C. $15.00. B. $12.78. D. $16.50. G & N 10e Budgeted Fixed Overhead 26. Aurora applies overhead at $8 per direct labor hour of which $3 is variable overhead. Budgeted direct labor hours were 90,000. Budgeted fixed overhead was (E) a. $270,000 c. $720,000 b. $450,000 d. None of the above. D, L & H 9e *. Broker Corp.’s budget shows straight-line depreciation on machinery of P516,000 based on the annual production volume of 103,200 units of product. In July, it produced 8,170 units of product, and the accounts had actual depreciation on machinery of P41,000. It controls manufacturing costs with a flexible budget. The flexible budget for the depreciation of the machine for July is (M) a. P38,950 c. P41,000 b. P43,000 d. P40,850 RPCPA 0596 165

. Simson Company's master budget shows straight-line depreciation on factory equipment of $258,000. The master budget was prepared at an annual production volume of 103,200 units of product. This production volume is expected to occur uniformly throughout the year. During September, Simson produced 8,170 units of product, and the accounts reflected actual depreciation on factory machinery of $20,500. Simson controls manufacturing costs with a flexible budget. The flexible budget amount for depreciation on factory machinery for September would be (M) A. $19,475. C. $20,500. B. $20,425. D. $21,500. CMA 0686 4-23

166

. Jenny’s Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Page 82 of 171

MANAGEMENT ADVISORY SERVICES Production 25,000 units Machine-hours 6,100 hours Fixed overhead costs for $123,000 March What is the flexible-budget amount? (E) a. $120,000 c. $123,000 b. $122,000 d. $125,000 167

.

STANDARD COSTS AND VARIANCE ANALYSIS 24,000 units 6,000 hours $120,000

Horngren

Matthew’s Corporation manufactured 10,000 golf bags during March. The fixed overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 10,000 units 12,000 units Machine-hours 5,100 hours 6,000 hours Fixed overhead cost for $122,000 $120,000 March What is the flexible-budget amount? (E) a. $100,000 c. $120,000 b. $102,000 d. $122,000 Horngren

95. The Tate Company uses a standard costing system in which manufacturing overhead is applied to units of product on the basis of direct labor hours (DLHs). The company recorded the following costs and activity for September: Cost: Actual fixed overhead costs incurred $61,400 Volume variance $2,850 Unfavorable Fixed portion of the predetermined overhead rate $0.95 per DLH Activity: Number of units completed 22,800 Standard direct labor hours allowed per unit of product 2.5 DLHs Denominator activity 60,000 DLHs The amount of fixed overhead cost contained in the company’s flexible budget for manufacturing overhead for September was: (E) a. $61,400. c. $60,000. b. $57,000. d. $58,550. G & N 9e CMA EXAMINATION QUESTIONS

Denominator Hours 168 . Sacto Co.’s standard fixed overhead cost is $3 per direct labor hour based on budgeted fixed costs of $300,000. The standard allows 2 direct labor hours per unit. During 1995,Sacto produced 55,000 units of product, incurred $315,000 of fixed overhead costs, and recorded 106,000 actual hours of direct labor. What is the standard activity level on which Sacto based its fixed overhead rate? (E) a. 110,000 direct labor hours d. 50,000 direct labor hours b. 105,000 direct labor hours e. 106,000 direct labor hours c. 100,000 direct labor hours H&M Applied Fixed Overhead 169 . Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours. unit requires two standard hours of labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was $3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: Actual production 198,000 Units Actual direct labor-hours 440,000 direct labor-hours Actual variable overhead $352,000 Actual fixed overhead $575,000 The fixed overhead applied to Franklin's production for the year is (M) A. $484,200. C. $594,000. B. $575,000. D. $600,000. CMA 1290 3-9 170

. Jenny’s Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 25,000 units 24,000 units Machine-hours 6,100 hours 6,000 hours Fixed overhead costs for $123,000 $120,000 March What is the amount of fixed overhead allocated to production? (E) a. $120,000 c. $123,000 Page 83 of 171

MANAGEMENT ADVISORY SERVICES b. $122,000 171

.

STANDARD COSTS AND VARIANCE ANALYSIS d. $125,000

Horngren

Matthew’s Corporation manufactured 10,000 golf bags during March. The fixed overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 10,000 units 12,000 units Machine-hours 5,100 hours 6,000 hours Fixed overhead cost for $122,000 $120,000 March What is the amount of fixed overhead allocated to production? (E) a. $100,000 c. $120,000 b. $102,000 d. $122,000 Horngren

94. The Tate Company uses a standard costing system in which manufacturing overhead is applied to units of product on the basis of direct labor hours (DLHs). The company recorded the following costs and activity for September: Cost: Actual fixed overhead costs incurred $61,400 Volume variance $2,850 Unfavorable Fixed portion of the predetermined overhead rate $0.95 per DLH Activity: Number of units completed 22,800 Standard direct labor hours allowed per unit of product 2.5 DLHs Denominator activity 60,000 DLHs The amount of fixed manufacturing overhead cost applied to work in process during September was: (E) a. $61,400. c. $54,150. b. $57,000. d. $59,850. G & N 9e

Denominator level of activity 5,800 DLHs Fixed overhead cost $58,870 The following data pertain to operations for the most recent period: Actual hours 6,100 DLHs Standard hours allowed for the actual output 6,018 DLHs Actual total fixed overhead cost $58,320 How much fixed overhead was applied to products during the period to the nearest dollar? (E) A. $58,870 C. $61,915 B. $61,083 D. $58,320 G & N 10e 76.

A manufacturer of playground equipment has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,000 MHs Fixed overhead cost $40,650 The following data pertain to operations for the most recent period: Actual hours 3,400 MHs Standard hours allowed for the actual output 3,172 MHs Actual total fixed overhead cost $41,600 How much fixed overhead was applied to products during the period to the nearest dollar? (E) a. $40,650 c. $41,600 b. $42,981 d. $46,070 G & N 9e

86. The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead:

97. A manufacturer of playground equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

CMA EXAMINATION QUESTIONS

Page 84 of 171

MANAGEMENT ADVISORY SERVICES Direct labor-hours (DLH) 10,000 20,000 Total variable overhead costs $11,500 $23,000 Total fixed overhead costs $30,000 $30,000 The following data concerning production pertain to last year's operations:  The company used a denominator activity of 15,000 direct labor-hours to compute the predetermined overhead rate.  The company made 6,850 units of product and worked 14,200 actual hours during the year.  Actual variable overhead was $15,904 and actual fixed overhead was $30,850 for the year.  The standard direct labor time is two hours per unit of product. The fixed overhead cost applied to work in process was: (E) A. $27,400. C. $30,850. B. $30,000. D. $13,700. G & N 10e fff Fixed Overhead Variance Actual Fixed Overhead . Meldouville Company has just finished reviewing the results of its operations for the current period. The company’s chief accountant told management that the total overhead spending variance was unfavorable by $1,000. However, the variable overhead portion of this variance was favorable by $200. The company’s volume variance, according to the accountant, was favorable by $300. During the period Medouville applied $1,800 of fixed overhead to production. The adjustment at the end of the period to allocate under-or-overapplied overhead included a debit of $200 to the Factory Overhead Control account. Meldouville’s actual fixed overhead costs for the period amounted to (M) A. $3,300 C. $900 B. $300 D. $2,700 Flamholtz & Diamond Fixed Overhead Spending (Budget) Variance 172 . A company's flexible budget shows an expected fixed cost of $100,000 for straight-line depreciation when sales total 50,000 units. If sales total 52,000 units, and the actual cost of depreciation is $103,000, what will be the budget variance? (E) CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS A. $1,000 favorable. B. $3,000 favorable.

C. $1,000 unfavorable. D. $3,000 unfavorable.

Gleim

173

. Selo Imports uses flexible budgeting for the control of costs. The company’s annual master budget includes $324,000 for fixed production supervisory salaries at a volume of 180,000 units. Supervisory salaries are expected to be incurred uniformly through the year. During September, 15,750 units were produced and production supervisory salaries incurred were $28,000. A performance report for September should reflect a budget variance of (E) a. $350 F c. $1,000 U b. $350 U d. $1,000 F CMA 0687 4-17

174

. Sacto Co.’s standard fixed overhead cost is $3 per direct labor hour based on budgeted fixed costs of $300,000. The standard allows 2 direct labor hours per unit. During 1995,Sacto produced 55,000 units of product, incurred $315,000 of fixed overhead costs, and recorded 106,000 actual hours of direct labor. What is Sacto’s fixed overhead spending variance for 1995? (E) a. $30,000 (F) d. $15,000 (U) b. $12,000 (F) e. $15,000 (F) c. $18,000 (U) H&M

65. Derf Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000. The fixed overhead budget variance for the period was: (E) A. $6,300 unfavorable. C. $1,500 unfavorable. B. $2,500 unfavorable. D. $1,000 unfavorable. G & N 10e 40. Bonds Company uses the equation $300,000 + $1.75 per direct labor hour to budget manufacturing overhead. Bonds has budgeted 125,000 direct Page 85 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

labor hours for the year. Actual results were 110,000 direct labor hours, $297,000 fixed overhead, and $194,500 variable overhead. The fixed overhead budget variance for the year is (E) a. $2,000. c. $47,000. b. $3,000. d. $48,000. L & H 10e 46. Antaya Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Antaya has budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $388,000 fixed overhead, and $98,600 variable overhead. The fixed overhead budget variance for the year is (E) a. $13,000. c. $17,000. b. $47,000 d. $30,000. L & H 10e 40. Alcatraz Company uses the equation $400,000 + $1.75 per direct labor hour to budget manufacturing overhead. Alcatraz has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct labor hours, $397,000 fixed overhead, and $194,500 variable overhead. The fixed overhead budget variance for the year is (E) a. $2,000 c. $47,000 b. $3,000 d. $48,000 D, L & H 9e 46. Hughes Company uses the equation $375,000 + $1.20 per direct labor hour to budget manufacturing overhead. Hughes had budgeted 75,000 direct labor hours for the year. Actual results were 81,000 direct labor hours, $397,000 fixed overhead, and $94,500 variable overhead. The fixed overhead budget variance for the year is (E) a. $2,700 c. $22,000 b. $10,700 d. $30,000 D, L & H 9e 63.

King Company estimated that it would operate its manufacturing facilities at 800,000 direct labor hours for the year and this served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labor hour. The standard direct labor time

CMA EXAMINATION QUESTIONS

was 3 direct labor hours per unit. The actual results for the year are presented below: Actual finished units 250,000 Actual direct labor hours 764,000 Actual variable overhead $1,610,000 Actual fixed overhead $ 392,000 The fixed overhead spending variance for the year is: (E) a. $8,000 F. c. $17,000 U. b. $10,000 U. d. $74,000 F. AICPA, Adapted 175

. Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours. Each unit requires two standard hours of labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was $3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: Actual production 198,000 Units Actual direct labor-hours 440,000 direct labor-hours Actual variable overhead $352,000 Actual fixed overhead $575,000 Franklin's fixed overhead spending variance for the year is (E) A. $19,000 favorable. C. $5,750 favorable. B. $25,000 favorable. D. $25,000 unfavorable. CMA 1290 3-8

88. Jessep Corporation has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor hours. The company has provided the following data concerning its fixed manufacturing overhead costs in March: Denominator hours 15,000 hours Actual hours worked 14,000 hours Standard hours allowed for the output 12,000 hours Flexible budget fixed overhead cost $45,000 Actual fixed overhead costs $48,000 The fixed overhead budget variance is: (E) a. $1,000 U. c. $2,000 U. Page 86 of 171

MANAGEMENT ADVISORY SERVICES b. $3,000 U.

STANDARD COSTS AND VARIANCE ANALYSIS d. $2,000 F.

G & N 9e

36. Jaune Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labor hours (DLHs). The following data pertain to last month's operations: Budgeted fixed overhead costs $5,000 Actual fixed overhead costs $5,500 Standard hours allowed for output 2,400 DLHs Predetermined overhead rate ($2 variable+ $3 fixed) $5 per DLH The fixed overhead budget variance is: (E) a. $500 U. c. $2,200 U. b. $500 F. d. $1,700 U. G & N 9e 35. Mauve Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labor hours (DLHs). The following data pertain to last month: Actual hours worked 2,400 DLHs Budgeted fixed overhead costs $10,000 Actual fixed overhead costs $10,400 Standard hours allowed 2,500 DLHs Predetermined overhead rate $5 per DLH The fixed overhead budget variance is: (E) a. $400 U. c. $300 F. b. $500 F. d. $300 U. G & N 9e 71. Able Control Company, which manufactures electrical switches, uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of direct labor-hours (DLHs). The standard overhead costs are shown below:

Variable overhead (5 DLHs @ $8.00 per DLH) $40 Fixed overhead (5 DLHs @ $12.00* per DLH) $60 *Based on 300,000 DLHs per month. The following information is available for the month of October:  Plans had called for the production of 60,000 switches.  56,000 switches were actually produced.  275,000 direct labor-hours were worked at a total cost of $2,550,000.  Actual variable overhead costs were $2,340,000.  Actual fixed overhead costs were $3,750,000. The fixed overhead spending variance for October was: (E) A. $48,000 Unfavorable. C. $300,000 Favorable. B. $150,000 Unfavorable. D. $390,000 Unfavorable. G & N 10e 90. The Stephens Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company has the following flexible budget (in condensed form) for manufacturing overhead: Direct labor-hours (DLH) 15,000 30,000 Total variable overhead costs $17,250 $34,500 Total fixed overhead costs $45,000 $45,000 The following data concerning production pertain to last year's operations:  The company used a denominator activity of 22,500 direct labor hours to compute the predetermined overhead rate.  The company made 10,275 units of product and worked 21,300 actual hours during the year.  Actual variable overhead was $23,856 and actual fixed overhead was $46,275 for the year.  The standard direct labor time is 2 hours per unit of product. The fixed overhead budget variance was: (E) A. $2,550 U. C. $1,275 U. B. $5,175 U. D. $5,175 F. G & N 10e 87. The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead:

CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES Direct labor-hours (DLH) 10,000 20,000 Total variable overhead costs $11,500 $23,000 Total fixed overhead costs $30,000 $30,000 The following data concerning production pertain to last year's operations:  The company used a denominator activity of 15,000 direct labor-hours to compute the predetermined overhead rate.  The company made 6,850 units of product and worked 14,200 actual hours during the year.  Actual variable overhead was $15,904 and actual fixed overhead was $30,850 for the year.  The standard direct labor time is two hours per unit of product. The fixed overhead budget variance was: (E) A. $3,450 unfavorable. C. $850 unfavorable. B. $3,450 favorable. D. $1,200 favorable. G & N 10e 90. An outdoor barbecue grill manufacturer has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 DLHs Fixed overhead cost $26,895 The following data pertain to operations for the most recent period: Actual hours 3,400 DLHs Standard hours allowed for the actual output 3,420 DLHs Actual total fixed overhead cost $28,295 What was the fixed overhead budget variance for the period to the nearest dollar? (E) a. $166 U c. $585 F b. $422 F d. $1,400 U G & N 9e 92. An outdoor barbecue grill manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 4,600 MHs Fixed overhead cost $50,140 The following data pertain to operations for the most recent period: CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Actual hours 5,000 MHs Standard hours allowed for the actual output 4,743 MHs Actual total fixed overhead cost $48,690 What was the fixed overhead budget variance for the period to the nearest dollar? (E) a. $5,810 U c. $1,450 F b. $2,503 F d. $3,009 U G & N 9e 108. An outdoor barbecue grill manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,900 MHs Fixed overhead cost $95,565 The following data pertain to operations for the most recent period: Actual hours 7,300 MHs Standard hours allowed for the actual output 7,084 MHs Actual total fixed overhead cost $94,565 What was the fixed overhead budget variance for the period to the nearest dollar? (E) A. $2,798 F C. $3,548 U B. $6,540 U D. $1,000 F G & N 10e 51.

A manufacturing company has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,100 MHs Overhead costs at the denominator activity level: Variable overhead cost $35,075 Fixed overhead cost $77,775 The following data pertain to operations for the most recent period: Actual hours 6,300 MHs Standard hours allowed for the actual output 5,994 MHs Actual total variable overhead cost $36,540 Actual total fixed overhead cost $76,875 What was the fixed overhead budget variance for the period to the nearest dollar? (E) a. $900 F c. $3,734 F Page 88 of 171

MANAGEMENT ADVISORY SERVICES b. $452 F

STANDARD COSTS AND VARIANCE ANALYSIS d. $3,450 U

G & N 9e

94. A furniture manufacturer has a standard costing system based on machinehours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 1,400 MHs Overhead costs at the denominator activity level: Variable overhead cost $12,040 Fixed overhead cost $17,360 The following data pertain to operations for the most recent period: Actual hours 1,300 MHs Standard hours allowed for the actual output 1,440 MHs Actual total variable overhead cost $11,440 Actual total fixed overhead cost $18,560 What was the fixed overhead budget variance for the period to the nearest dollar? (E) A. $2,440 F C. $1,999 U B. $1,200 U D. $704 F G & N 10e 73.

A furniture manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 MHs Overhead costs at the denominator activity level: Variable overhead cost $31,845 Fixed overhead cost $40,425 The following data pertain to operations for the most recent period: Actual hours 3,400 MHs Standard hours allowed for the actual output 3,078 MHs Actual total variable overhead cost $32,980 Actual total fixed overhead cost $38,975 What was the fixed overhead budget variance for the period to the nearest dollar? (E) a. $2,675 U c. $3,691 F b. $1,450 F d. $1,270 F G & N 9e

CMA EXAMINATION QUESTIONS

98. A manufacturer of playground equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 5,800 DLHs Fixed overhead cost $58,870 The following data pertain to operations for the most recent period: Actual hours 6,100 DLHs Standard hours allowed for the actual output 6,018 DLHs Actual total fixed overhead cost $58,320 What was the fixed overhead budget variance for the period to the nearest dollar? (E) A. $3,595 U C. $2,763 U B. $550 F D. $784 F G & N 10e 77.

A manufacturer of playground equipment has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,000 MHs Fixed overhead cost $40,650 The following data pertain to operations for the most recent period: Actual hours 3,400 MHs Standard hours allowed for the actual output 3,172 MHs Actual total fixed overhead cost $41,600 What was the fixed overhead budget variance for the period to the nearest dollar? (E) a. $4,470 U c. $2,790 F b. $950 U d. $1,381 U G & N 9e

52.

A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

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MANAGEMENT ADVISORY SERVICES Denominator level of activity 3,700 DLHs Overhead costs at the denominator activity level: Variable overhead cost $28,490 Fixed overhead cost $47,545 The following data pertain to operations for the most recent period: Actual hours 3,900 DLHs Standard hours allowed for the actual output 3,850 DLHs Actual total variable overhead cost $29,445 Actual total fixed overhead cost $47,995 What was the fixed overhead budget variance for the period to the nearest dollar? (E) A. $615 F C. $1,478 U B. $2,120 U D. $450 U G & N 10e 59.

The Ferris Company applies manufacturing overhead costs to products on the basis of direct labor hours. The standard cost card shows that 3 direct labor hours are required per unit of product. For August, the company budgeted to work 90,000 direct labor hours and to incur the following total manufacturing overhead costs: Total variable overhead costs $ 99,000 Total fixed overhead costs $118,800 During August, the company completed 28,000 units of product, worked 86,000 direct labor hours, and incurred the following total manufacturing overhead costs: Total variable overhead costs $ 98,900 Total fixed overhead costs $115,300 The denominator activity in the predetermined overhead rate is 90,000 direct labor hours. For August, the fixed overhead budget variance is: (E) a. $3,500 F. c. $3,200 F. b. $3,500 U. d. $3,200 U. G & N 9e

83. The following data are the actual results for Roadtrek Co. for October: Actual output 9,000 cases Actual variable overhead P405,000 Actual fixed overhead P122,000 Actual machine time 40,500 machine hours CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Standard cost and budget information for Roadtrek Company follows: Standard variable overhead rate P9.00 per MH Standard quantity of machine hours 4 hours per case Budgeted fixed overhead P1,440,000 per year Budgeted output 10,000 cases per month The amount of fixed overhead controllable variance is (E) A. P2,000 U C. P42,500 U B. P2,000 F D. P42,500 F Pol Bobadilla 176

. Ritz Production Company has the following information: Standard factory overhead rates are based on a normal monthly volume of 10,000 units (1 standard direct hour per unit). Standard factory overhead rates per direct labor hour are: Fixed $3.0 0 Variable 5.0 $8.00 0 Units actually produced in current month 9,000 units Actual factory overhead costs incurred (includes $78,000 $35,000 fixed) Actual direct labor hours 9,000 hours What is the fixed overhead spending variance for Ritz? (E) a. $3,000 (U) d. $5,000 (F) b. $0 e. $5,000 (U) c. $2,000 (F) . H&M

177

. Smith Corporation uses a standard cost system. Information for the month of April is as follows: Actual manufacturing overhead costs (13,000 is fixed) $40,000 Direct labor: Actual hours worked 12,000 hrs. Standard hours allowed 10,000 hrs. Average actual labor cost per hour $9 Standard cost data at 12,000 direct labor hours was: Page 90 of 171

MANAGEMENT ADVISORY SERVICES Variable factory overhead $24,000 Fixed factory overhead 12,000 Total factory overhead $36,000 The factory overhead rate is based on a normal volume of 12,000 direct labor hours. What is the fixed overhead spending variance for Smith? (E) a. $1,000 (U) d. $10,000 (U) b. $4,000 (U) e. $3,000 (U) c. $2,000 (U) H&M 94.

Standard Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows: Standard costs per unit: Variable portion 2 hours @ $3 = $ 6 Fixed portion 2 hours @ $5 = 10 $16 During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to April:  Actual machine hours used were 165,000.  Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed).  All inventories are carried at standard cost. Standard Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows: Standard costs per unit: Variable portion 2 hours @ $3 = $ 6 Fixed portion 2 hours @ $5 = 10 $16 During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to April:  Actual machine hours used were 165,000.  Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed).  All inventories are carried at standard cost. The fixed overhead spending variance for April was (E) a. $40,000 U. c. $60,000 F. b. $40,000 F. d. $60,000 U. Barfield

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 58.

178

The Chase Company uses a standard cost system in which manufacturing overhead costs are applied to products on a basis of machine-hours. For November, the company's flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activity level of 40,000 machine-hours: Variable overhead costs (total): Maintenance $36,000 Utilities $20,000 Fixed overhead costs (total): Supervision $24,000 Depreciation $16,00 During November 42,000 machine-hours were used to complete 13,200 units of product with the following actual overhead costs: Variable overhead costs (total): Maintenance $43,420 Utilities $32,510 Fixed overhead costs (total): Supervision $26,970 Depreciation $16,000 The standard time allowed to complete one unit of product is 3.6 machinehours. The fixed overhead budget variance for November was: (E) A. $ 2,970 unfavorable. C. $ 7,520 favorable. B. $ 4,550 favorable. D. $22,900 unfavorable. G & N 10e

. Jenny’s Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 25,000 units 24,000 units Machine-hours 6,100 hours 6,000 hours Fixed overhead costs for $123,000 $120,000 March What is the fixed overhead spending variance? (E) a. $1,000 unfavorable c. $3,000 unfavorable b. $2,000 favorable d. $5,000 favorable Horngren Page 91 of 171

MANAGEMENT ADVISORY SERVICES 55.

The Dillon Company makes and sells a single product and uses a flexible budget for overhead to plan and control overhead costs. Overhead costs are applied on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit. The Dillon Company had the following budgeted and actual data for March: Actual Budgeted Units produced 33,900 30,800 Direct labor-hours 161,800 154,000 Variable overhead $140,500 $123,200 costs Fixed overhead costs $80,000 $77,000 The fixed overhead budget variance for March is: (E) a. $900 F. c. $3,000 U. b. $3,900 F. d. $7,750 F. G & N 9e

61. The Phelps Company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March: Actual Budgeted Units produced 22,000 20,000 Direct labor-hours 105,000 100,000* Variable overhead $91,000 $80,000 costs Fixed overhead costs $52,000 $50,000 *Represents the denominator activity for the month. The fixed overhead budget variance for March is: (E) A. $2,000 favorable. C. $2,000 unfavorable. B. $ 500 favorable. D. $2,500 favorable. G & N 10e 69. The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for the year: CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Actual Units produced 33,000 Direct labor-hours 157,500 Variable overhead costs $136,500 Fixed overhead costs $ 78,000 *Represents the denominator activity. The fixed overhead budget variance was: (E) A. $750 F. C. $7,500 F. B. $3,750 F. D. $3,000 U.

Budgeted 30,000 150,000* $120,000 $ 75,000

G & N 10e

63. Baltimore, Inc. analyzes manufacturing overhead in the production of its only one product, Blu. The following set of information applies to the month of May, 2003: Budgeted Actual Units produced 40,000 38,000 Variable manufacturing overhead P4/DLH P16,400 Fixed manufacturing overhead P20/DLH P88,000 Direct labor hours 6 4,200 hours minutes/uni t What is the fixed overhead spending variance? (E) A. P4,000 Favorable C. P8,000 Unfavorable B. P8,000 Favorable D. P4,000 Unfavorable Pol Bobadilla 36. Long Company analyzes its manufacturing overhead in the production of its only one product, Shorts. The following set of information applies to the month of January 2004: Budgeted Actual Units produced 40,000 38,000 Variable manufacturing overhead P4/DLH P16,400 Fixed manufacturing overhead P20/DLH P85,000 Direct labor hours 6 4,000 hours minutes/uni t What is the fixed overhead spending variance? (E) a. P5,000 Favorable c. P1,600 Unfavorable Page 92 of 171

MANAGEMENT ADVISORY SERVICES b. P1,600 Favorable

STANDARD COSTS AND VARIANCE ANALYSIS d. P5,000 Unfavorable Pol Bobadilla

Volume Variance 77. The Forkes Company uses a standard cost system in which overhead costs are applied to products on the basis of direct labor-hours (DLHs). The following data applied to the company's activities for the month of June: Actual fixed overhead cost incurred $161,450 Denominator activity 50,000 DLHs Number of units completed 21,000 Units Fixed overhead budget variance $11,450 Unfavorable Standard direct labor-hours per unit 3 DLHs The volume variance for June is: (M) A. $44,954 Unfavorable. C. $39,000 Unfavorable. B. $39,000 Favorable. D. $44,954 Favorable. G & N 10e 79. The Malcolm Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of direct labor-hours (DLHs). The standards call for 3 hours of direct labor per unit produced. The following data pertain to the company's manufacturing overhead for the month of July: Actual fixed overhead cost incurred $28,450 Denominator activity 8,400 DLHs Number of units produced 2,900 units Budget variance $3,250 Unfavorable The volume variance for July is: (M) A. $1,131 F. C. $1,131 U. B. $900 F. D. $900 U. G & N 10e 179

. J. R. Richard Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Direct materials $14.50 Direct labor (2 direct labor hours x $8) 16.00 Manufacturing overhead (2 direct labor hours x $11) 22.00 Total standard cost $52.50 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:

CMA EXAMINATION QUESTIONS

Variable Fixed

$3,600,000 3,000,000 $6,600,000 During November, Richard produced 26,000 units. Richard used 53,500 direct labor hours in November at a cost of $433,350. Actual manufacturing overhead for the month was $250,000 fixed and $325,000 variable. The manufacturing overhead volume variance for November is:(M) A. $12,000 unfavorable D. $9,000 unfavorable B. $10,000 unfavorable E. $1,000 favorable C. $3,000 unfavorable CMA adapted Standard Fixed Overhead Rate 76. The Forkes Company uses a standard cost system in which overhead costs are applied to products on the basis of direct labor-hours (DLHs). The following data applied to the company's activities for the month of June: Actual fixed overhead cost incurred $161,450 Denominator activity 50,000 DLHs Number of units completed 21,000 Units Fixed overhead budget variance $11,450 Unfavorable Standard direct labor-hours per unit 3 DLHs The fixed portion of the predetermined overhead rate for June is: (M) A. $3.00. C. $3.78. B. $3.23. D. $3.46. G & N 10e 78. The Malcolm Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of direct labor-hours (DLHs). The standards call for 3 hours of direct labor per unit produced. The following data pertain to the company's manufacturing overhead for the month of July:

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MANAGEMENT ADVISORY SERVICES Actual fixed overhead cost incurred $28,450 Denominator activity 8,400 DLHs Number of units produced 2,900 units Budget variance $3,250 Unfavorable The fixed portion of the predetermined overhead rate for June is: (M) A. $3.11. C. $3.77. B. $3.39. D. $3.00. G & N 10e vvv Volume Variance 39. Gamma Corporation has total budgeted fixed costs of $150,000. Actual production was 8,000 units; normal capacity is 7,500 units. What was the volume variance? (E) a. $10,000 favorable c. $15,000 unfavorable b. $15,000 favorable d. $10,000 unfavorable D, L & H 9e 42. Monona Corporation has total budgeted fixed costs of $64,000. Actual production was 15,000 units; normal capacity is 16,000 units. What was the volume variance? (E) a. $4,000 favorable c. $4,267 unfavorable b. $4,267 favorable d. $4,000 unfavorable D, L & H 9e 13. ABC had $400,000 budgeted fixed overhead costs and based its standard on normal activity of 40,000 units. Actual fixed overhead costs were $430,000, actual production was 36,000 units, and sales were 30,000 units. The volume variance was (E) a. $30,000. c. $70,000. b. $40,000. d. $77,777. D, L & H 9e 13. ABC had $200,000 budgeted fixed overhead costs and based its standard on normal activity of 20,000 units. Actual fixed overhead costs were $215,000, actual production was 18,000 units, and sales were 15,000 units. The volume variance was (E) a. $15,000 c. $35,000 b. $20,000 d. $38,888 D, L & H 9e *. Assuming actual factory overhead is P7,250; budgeted fixed overhead is P3,600; variable overhead rate is P2.00 per hour and the standard hours in CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS the product are 2,000 hours. Assuming that the fixed factory overhead rate is P1.20 per hour – the volume variance is (E) a. P1,000 c. P1,400 b. P1,200 d. P1,600 RPCPA 1078 180

. Sacto Co.’s standard fixed overhead cost is $3 per direct labor hour based on budgeted fixed costs of $300,000. The standard allows 2 direct labor hours per unit. During 1995,Sacto produced 55,000 units of product, incurred $315,000 of fixed overhead costs, and recorded 106,000 actual hours of direct labor. What is Sacto’s fixed overhead volume variance for 1995? (E) a. $30,000 (F) d. $30,000 (U) b. $12,000 (F) e. $15,000 (F) c. $18,000 (U) H&M

66. Derf Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000. The fixed overhead volume variance for the period was: (M) A. $750 unfavorable. C. $1,500 unfavorable. B. $2,500 unfavorable. D. $1,000 unfavorable. G & N 10e *. TYD, Inc. reported the following data for 1996: Actual hours Denominator hours Standard hours allowed for output Fixed predetermined overhead rate Variable predetermined overhead rate TYD’s 1996 volume variance was (M) a. P60,000 which is neither favorable nor under-applied. b. P60,000 favorable. c. No volume variance.

120,000 150,000 140,000 P6 per hour P4 per hour

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MANAGEMENT ADVISORY SERVICES d. P60,000 under-applied. 181

STANDARD COSTS AND VARIANCE ANALYSIS RPCPA 1097

. Ritz Production Company has the following information: Standard factory overhead rates are based on a normal monthly volume of 10,000 units (1 standard direct hour per unit). Standard factory overhead rates per direct labor hour are: Fixed $3.0 0 Variable 5.0 $8.00 0 Units actually produced in current month 9,000 units Actual factory overhead costs incurred (includes $78,000 $35,000 fixed) Actual direct labor hours 9,000 hours What is the fixed overhead volume variance for Ritz? (E) a. $3,000(U) d. $5,000(F) b. $0 e. $5,000(U) c. $2,000(F) . H&M

64.

King Company estimated that it would operate its manufacturing facilities at 800,000 direct labor hours for the year and this served as the denominator activity in the predetermined overhead rate. The total budgeted manufacturing overhead for the year was $2,000,000, of which $1,600,000 was variable and $400,000 was fixed. The standard variable overhead rate was $2 per direct labor hour. The standard direct labor time was 3 direct labor hours per unit. The actual results for the year are presented below: Actual finished units 250,000 Actual direct labor hours 764,000 Actual variable overhead $1,610,000 Actual fixed overhead $ 392,000 The fixed overhead volume variance for the year is: (E) a. $7,000 U. c. $41,667 U. b. $25,000 U. d. $18,000 F. AICPA, Adapted

CMA EXAMINATION QUESTIONS

182

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours. Each unit requires two standard hours of labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at $900,000 for the year, and the fixed overhead rate was $3.00 per unit. The actual data pertaining to the manufacturing overhead for the year are presented below: Actual production 198,000 Units Actual direct labor-hours 440,000 direct labor-hours Actual variable overhead $352,000 Actual fixed overhead $575,000 Franklin's fixed overhead volume variance for the year is (M) A. $6,000 unfavorable. C. $25,000 favorable. B. $19,000 favorable. D. $55,000 unfavorable. CMA 1290 3-10

89. Jessep Corporation has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor hours. The company has provided the following data concerning its fixed manufacturing overhead costs in March: Denominator hours 15,000 hours Actual hours worked 14,000 hours Standard hours allowed for the output 12,000 hours Flexible budget fixed overhead cost $45,000 Actual fixed overhead costs $48,000 The fixed overhead volume variance is (M) a. $3,000 U. c. $9,000 U. b. $3,000 F. d. $6,000 U. G & N 9e 91. An outdoor barbecue grill manufacturer has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 DLHs Fixed overhead cost $26,895 The following data pertain to operations for the most recent period: Page 95 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Actual hours 3,400 DLHs Standard hours allowed for the actual output 3,420 DLHs Actual total fixed overhead cost $28,295 What was the fixed overhead volume variance for the period to the nearest dollar? (M) a. $978 F c. $163 F b. $993 F d. $815 F G & N 9e 93. An outdoor barbecue grill manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 4,600 MHs Fixed overhead cost $50,140 The following data pertain to operations for the most recent period: Actual hours 5,000 MHs Standard hours allowed for the actual output 4,743 MHs Actual total fixed overhead cost $48,690 What was the fixed overhead volume variance for the period to the nearest dollar? (M) a. $2,801 U c. $1,468 F b. $1,559 F d. $4,360 F G & N 9e 109. An outdoor barbecue grill manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

Denominator level of activity 6,900 MHs Fixed overhead cost $95,565 The following data pertain to operations for the most recent period: Actual hours 7,300 MHs Standard hours allowed for the actual output 7,084 MHs Actual total fixed overhead cost $94,565 What was the fixed overhead volume variance for the period to the nearest dollar? (M) A. $2,548 F C. $5,540 F B. $2,992 U D. $2,456 F G & N 10e 95. A furniture manufacturer has a standard costing system based on machinehours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 1,400 MHs Overhead costs at the denominator activity level: Variable overhead cost $12,040 Fixed overhead cost $17,360 The following data pertain to operations for the most recent period: Actual hours 1,300 MHs Standard hours allowed for the actual output 1,440 MHs Actual total variable overhead cost $11,440 Actual total fixed overhead cost $18,560 What was the fixed overhead volume variance for the period to the nearest dollar? (E) A. $1,240 U C. $1,736 F B. $496 F D. $516 F G & N 10e 74.

CMA EXAMINATION QUESTIONS

A furniture manufacturer has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,300 MHs Overhead costs at the denominator activity level: Variable overhead cost $31,845 Fixed overhead cost $40,425 The following data pertain to operations for the most recent period: Actual hours 3,400 MHs Page 96 of 171

MANAGEMENT ADVISORY SERVICES Standard hours allowed for the actual output 3,078 MHs Actual total variable overhead cost $32,980 Actual total fixed overhead cost $38,975 What was the fixed overhead volume variance for the period to the nearest dollar? (E) a. $2,720 U c. $2,811 U b. $1,225 F d. $3,945 U G & N 9e 99. A manufacturer of playground equipment has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 5,800 DLHs Fixed overhead cost $58,870 The following data pertain to operations for the most recent period: Actual hours 6,100 DLHs Standard hours allowed for the actual output 6,018 DLHs Actual total fixed overhead cost $58,320 What was the fixed overhead volume variance for the period to the nearest dollar? (E) A. $2,213 F C. $3,045 F B. $2,113 F D. $832 U G & N 10e 78.

A manufacturer of playground equipment has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,000 MHs Fixed overhead cost $40,650 The following data pertain to operations for the most recent period: Actual hours 3,400 MHs Standard hours allowed for the actual output 3,172 MHs Actual total fixed overhead cost $41,600 What was the fixed overhead volume variance for the period to the nearest dollar? (E) a. $2,256 F c. $3,089 U b. $2,331 F d. $5,420 F G & N 9e

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 53.

A manufacturing company has a standard costing system based on direct labor-hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 3,700 DLHs Overhead costs at the denominator activity level: Variable overhead cost $28,490 Fixed overhead cost $47,545 The following data pertain to operations for the most recent period: Actual hours 3,900 DLHs Standard hours allowed for the actual output 3,850 DLHs Actual total variable overhead cost $29,445 Actual total fixed overhead cost $47,995 What was the fixed overhead volume variance for the period to the nearest dollar? (E) A. $1,870 F C. $643 U B. $1,928 F D. $2,570 F G & N 10e

52.

A manufacturing company has a standard costing system based on machine-hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 6,100 MHs Overhead costs at the denominator activity level: Variable overhead cost $35,075 Fixed overhead cost $77,775 The following data pertain to operations for the most recent period: Actual hours 6,300 MHs Standard hours allowed for the actual output 5,994 MHs Actual total variable overhead cost $36,540 Actual total fixed overhead cost $76,875 What was the fixed overhead volume variance for the period to the nearest dollar? (E) a. $1,359 U c. $3,902 U b. $2,550 F d. $1,352 U G & N 9e

60.

The Ferris Company applies manufacturing overhead costs to products on the basis of direct labor hours. The standard cost card shows that 3 Page 97 of 171

MANAGEMENT ADVISORY SERVICES direct labor hours are required per unit of product. For August, the company budgeted to work 90,000 direct labor hours and to incur the following total manufacturing overhead costs: Total variable overhead costs $ 99,000 Total fixed overhead costs $118,800 During August, the company completed 28,000 units of product, worked 86,000 direct labor hours, and incurred the following total manufacturing overhead costs: Total variable overhead costs $ 98,900 Total fixed overhead costs $115,300 The denominator activity in the predetermined overhead rate is 90,000 direct labor hours. For August, the fixed overhead volume variance is: (E) a. $4,300 U. c. $4,980 F. b. $7,920 U. d. $4,980 U. G & N 9e 95.

Standard Company has developed standard overhead costs based on a capacity of 180,000 machine hours as follows: Standard costs per unit: Variable portion 2 hours @ $3 = $ 6 Fixed portion 2 hours @ $5 = 10 $16 During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to April:  Actual machine hours used were 165,000.  Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed).  All inventories are carried at standard cost. The fixed overhead volume variance for April was (E) a. $60,000 U. c. $100,000 F. b. $60,000 F. d. $100,000 U. Barfield

6. The following standards were developed based on a capacity of 180,000 direct labor hours as follows: Standard costs per unit: Variable portion 2 hours @ P3 = P6 Fixed portion 2 hours @ P5 = P10 CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS During April, 85,000 units were scheduled for production, but only 80,000 units were actually produced. The following data relate to April:  Actual direct labor cost incurred was P644,000 for 165,000 actual hours worked.  Actual overhead incurred totaled P1,378,000 (P518,000 variable plus P860,000 fixed).  All inventories are carried at standard cost. The volume variances for April were (M) A. P100,000 U C. P50,000 F B. P100,000 F D. P50,000 U Pol Bobadilla 70. Raff Co. has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor hours (DLHs). The following standards are based on 100,000 direct labor hours: Variable overhead 2 DLHs @ $3 per DLH = $6 per unit Fixed overhead 2 DLHs @ $4 per DLH = $8 per unit The following information pertains to operations during March: Units actually produced 38,000 Actual direct labor hours worked 80,000 Actual manufacturing overhead incurred: Variable overhead $250,000 Fixed overhead $384,000 For March, the fixed overhead volume variance was: (E) a. $96,000 U. c. $80,000 U. b. $96,000 F. d. $80,000 F. AICPA, Adapted 84. The following data are the actual results for Roadtrek Co. for October: Actual output 9,000 cases Actual variable overhead P405,000 Actual fixed overhead P122,000 Actual machine time 40,500 machine hours Standard cost and budget information for Roadtrek Company follows: Standard variable overhead rate P9.00 per MH Standard quantity of machine hours 4 hours per case Budgeted fixed overhead P1,440,000 per year Budgeted output 10,000 cases per month The amount of fixed overhead volume variance is (E) Page 98 of 171

MANAGEMENT ADVISORY SERVICES A. P12,000 F B. P12,000 U 26.

STANDARD COSTS AND VARIANCE ANALYSIS C. P21,000 F D. P21,000 U

Lord Industries manufactures a single product. Variable production costs are P10 and fixed production costs are P75,000. Lord uses a normal activity of 10,000 units to set its standard costs. Lord began the year with no inventory, produced 11,000 units and sold 10,500 units. The volume variance under each product costing are: (M) Pol Bobadilla A. B. C. D. Absorption P3,750 P3,750 P7,500 P7,500 Costing Variable P 0 P7,500 P3,750 P 0

21. Meteor Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Direct materials P14.50 Direct labor (2 direct labor hours at P9) 18.00 Manufacturing overhead ( 2 DLH at P12) 24.00 The manufacturing overhead rate is based upon the annual normal activity level of 600,000 direct labor hours. Meteor planned to produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is: Variable P4,200,000 Fixed 3,000,000 During November, Meteor produced 26,000 units. Meteor used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P250,000 fixed and P325,000 variable. The manufacturing overhead volume variance for November is (M) a. P10,000 unfavorable c. P5,000 unfavorable b. P10,000 favorable d. P5,000 favorable Pol Bobadilla 13. Atlas Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Direct materials P14.50 Direct labor (2 direct labor hours at P8) 16.00 Manufacturing overhead ( 2 DLH at P11) 22.00 CMA EXAMINATION QUESTIONS

The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Atlas 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, Atlas produced 26,000 units. Atlas used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P250,000 fixed and P325,000 variable. The manufacturing overhead volume variance for November is a. P12,000 favorable c. P3,000 favorable b. P10,000 favorable d. P9,000 favorable Pol Bobadilla

Pol Bobadilla

183

. Jenny’s Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 25,000 units 24,000 units Machine-hours 6,100 hours 6,000 hours Fixed overhead costs for $123,000 $120,000 March What is the fixed overhead production-volume variance? (E) a. $1,000 unfavorable c. $3,000 unfavorable b. $2,000 favorable d. $5,000 favorable Horngren

184

.

Matthew’s Corporation manufactured 10,000 golf bags during March. The fixed overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 10,000 units 12,000 units Machine-hours 5,100 hours 6,000 hours Fixed overhead cost for $122,000 $120,000 March What is the fixed overhead production-volume variance? (E) a. $2,000 unfavorable c. $20,000 unfavorable b. $18,000 favorable d. $22,000 unfavorable Horngren

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MANAGEMENT ADVISORY SERVICES 64. Baltimore, Inc. analyzes manufacturing overhead in the production of its only one product, Blu. The following set of information applies to the month of May, 2003: Budgeted Actual Units produced 40,000 38,000 Variable manufacturing P4/DLH P16,400 overhead Fixed manufacturing P20/DLH P88,000 overhead Direct labor hours 6 minutes/unit 4,200 hours What is the volume variance?(E) A. P4,000 Favorable C. P8,000 Favorable B. P4,000 Unfavorable D. P8,000 Unfavorable Pol Bobadilla 56.

The Dillon Company makes and sells a single product and uses a flexible budget for overhead to plan and control overhead costs. Overhead costs are applied on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit. The Dillon Company had the following budgeted and actual data for March: Actual Budgeted Units produced 33,900 30,800 Direct labor-hours 161,800 154,000 Variable overhead $140,500 $123,200 costs Fixed overhead costs $80,000 $77,000 The fixed overhead volume variance for March is: (E) a. $7,750 F. c. $1,550 F b. $7,750 U. d. $3,900 U. G & N 9e

62. The Phelps Company uses a flexible budget to plan and control manufacturing overhead costs. Overhead costs are applied to products on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. Phelps Company had the following budgeted and actual data for March:

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Actual 22,000 105,000

Budgeted 20,000 100,000*

Units produced Direct labor-hours Variable overhead $91,000 $80,000 costs Fixed overhead costs $52,000 $50,000 *Represents the denominator activity for the month. The fixed overhead volume variance for March is:(E) A. $1,000 favorable. C. $2,500 unfavorable. B. $5,000 favorable. D. $5,000 unfavorable. G & N 10e 70. The Dodge Company makes and sells a single product and uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of direct labor-hours. The standard cost card shows that 5 direct labor-hours are required per unit of product. The Dodge Company had the following budgeted and actual data for the year: Actual Budgeted Units produced 33,000 30,000 Direct labor-hours 157,500 150,000* Variable overhead costs $136,500 $120,000 Fixed overhead costs $ 78,000 $ 75,000 *Represents the denominator activity. The fixed overhead volume variance for was: (E) A. $7,500 F. C. $3,750 U. B. $1,500 F. D. $7,500 U. G & N 10e 91. The Stephens Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company has the following flexible budget (in condensed form) for manufacturing overhead:

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MANAGEMENT ADVISORY SERVICES Direct labor-hours (DLH) 15,000 30,000 Total variable overhead costs $17,250 $34,500 Total fixed overhead costs $45,000 $45,000 The following data concerning production pertain to last year's operations:  The company used a denominator activity of 22,500 direct labor hours to compute the predetermined overhead rate.  The company made 10,275 units of product and worked 21,300 actual hours during the year.  Actual variable overhead was $23,856 and actual fixed overhead was $46,275 for the year.  The standard direct labor time is 2 hours per unit of product. The volume variance was: (E) A. $7,800 U. C. $1,200 F. B. $1,500 F. D. $3,900 U. G & N 10e 88. The Steff Company has the following flexible budget (in condensed form) for manufacturing overhead: Direct labor-hours (DLH) 10,000 20,000 Total variable overhead costs $11,500 $23,000 Total fixed overhead costs $30,000 $30,000 The following data concerning production pertain to last year's operations:  The company used a denominator activity of 15,000 direct labor-hours to compute the predetermined overhead rate.  The company made 6,850 units of product and worked 14,200 actual hours during the year.  Actual variable overhead was $15,904 and actual fixed overhead was $30,850 for the year.  The standard direct labor time is two hours per unit of product. The volume variance was: (E) A. $2,000 favorable. C. $1,000 favorable. B. $2,600 unfavorable. D. $800 favorable. G & N 10e 38. Patridge Company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of direct labor CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS hours. The information below is taken from the company's flexible budget for manufacturing overhead: Percent of capacity 70% 80% 90% Direct labor hours 21,000 24,000 27,000 Variable overhead $ 42,000 $ 48,000 $ 54,000 Fixed overhead 108,000 108,000 108,000 Total overhead $150,000 $156,000 $162,000 During the year, the company operated at exactly 80% of capacity, but applied manufacturing overhead to products based on the 90% level. The company's fixed overhead volume variance for the year was: (M) a. $6,000 unfavorable. c. $12,000 unfavorable. b. $6,000 favorable. d. $12,000 favorable.AICPA, Adapted 28.

Hero 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 P108,000 P 108,000 Total factory overhead rate per DLH P6.75 P6.25 Hero 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? (M) a. P12,000 unfavorable c. P16,750 unfavorable b. P12,000 favorable d. P16,750 favorable Pol Bobadilla

28. Fidelity 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 P81,000 P 81,000 Total factory overhead rate per DLH P5.625 P5.25 Fidelity operated at 80 percent of capacity during the year, but applied factory overhead based on the 90 percent capacity level. Assuming that Page 101 of 171

MANAGEMENT ADVISORY SERVICES actual factory overhead was equal to the budgeted amount of overhead, how much was the overhead volume variance for the year? (M) a. P9,000 unfavorable c. P9,000 favorable b. P15,750 unfavorable d. P15,750 favorable Pol Bobadilla Budgeted Fixed Overhead 81. The Cloward Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). During August, the company actually used 6,100 direct labor-hours and produced 2,500 units of product. The standard cost card for one unit of product includes the following data for manufacturing overhead: Variable overhead: 2.5 DLHs @ $3.00 per DLH. Fixed overhead: 2.5 DLHs @ $2.50 per DLH. For August, the company incurred $16,150 of fixed overhead costs and recorded a $625 favorable volume variance. The amount of fixed overhead cost contained in the company's budget for August is: (E) A. $16,775. C. $15,525. B. $16,250. D. $15,000. G & N 10e 79. The Claus Company makes and sells a single product and uses standard costing. During January, the company actually used 8,700 direct laborhours (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 @ $4.00 per DLH. Fixed factory overhead: 3.0 DLHs. @ $3.50 per DLH. For January, the company incurred $22,000 of actual fixed overhead costs and recorded a $875 favorable volume variance. The budgeted fixed factory overhead cost for January is: (E) a. $31,500. c. $32,375. b. $30,625. d. $33,250. G & N 9e

STANDARD COSTS AND VARIANCE ANALYSIS Variable overhead: 3 DLHs @ $4.75 per DLH Fixed overhead: 3 DLHs @ $3.00 per DLH For February, the company incurred $28,450 in fixed overhead costs and recorded a $900 favorable volume variance. The amount of fixed overhead cost contained in the company's budget for February is: A. $27,000. C. $25,200. B. $27,550. D. $29,350. G & N 10e 40. The Murray Company makes and sells a single product. The company recorded the following activity and cost data for May: Number of units completed 45,000 units Standard direct labor-hours allowed per unit of product 1.5 DLHS Budgeted direct labor-hours (denominator activity) 72,000 DLHS Actual fixed overhead costs incurred $66,000 Volume variance $4,275 U The fixed portion of the predetermined overhead rate is $0.95 per direct labor-hour. The amount of fixed overhead contained in the company's overhead flexible budget for May was: (E) a. $64,125. c. $68,400. b. $67,500. d. $70,275. G & N 9e 103. The Murray Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct labor-hours (DLHs). The standard calls for 1.5 direct labor-hours per unit of product. The company recorded the following activity and cost data for May:

82. The Hawkins Company uses a standard costing system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). During February, the company actually used 9,200 direct labor-hours and made 2,900 units of finished product. The standard cost card for one unit of product includes the following: CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES Activity: Number of units produced 40,100 Units Denominator activity 64,000 DLHs Cost: Actual fixed overhead costs incurred $56,000 Volume variance $3,465 Unfavorable Fixed portion of the predetermined overhead rate $0.90 per DLH The amount of fixed overhead contained in the company's budget for May was: (E) A. $54,135. C. $59,465. B. $60,150. D. $57,600. G & N 10e 100.The Chase Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company recorded the following activity and cost data relating to manufacturing overhead for October: Activity: Number of units completed 31,200 Units Standard direct labor-hours per unit 1.6 DLHs Denominator activity 54,000 DLHs Cost: Actual fixed overhead costs incurred $51,300 Volume variance $3,468 Unfavorable Fixed portion of the predetermined overhead rate $0.85 per DLH The amount of fixed overhead cost contained in the company's overhead budget for September was: (E) A. $45,900. C. $49,920. B. $54,768. D. $47,703. G & N 10e Denominator Hours 80. The Cloward Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). During August, the company actually used 6,100 direct labor-hours and produced 2,500 units of product. The standard cost card for one unit of product includes the following data for manufacturing overhead: Variable overhead: 2.5 DLHs @ $3.00 per DLH. Fixed overhead: 2.5 DLHs @ $2.50 per DLH. CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS For August, the company incurred $16,150 of fixed overhead costs and recorded a $625 favorable volume variance. The denominator level of activity used by Cloward in setting the predetermined overhead rate for August is: (E) A. 6,750 DLHs. C. 6,250 DLHs. B. 6,000 DLHs. D. 6,500 DLHs. G & N 10e 80. The Claus Company makes and sells a single product and uses standard costing. During January, the company actually used 8,700 direct laborhours (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 @ $4.00 per DLH. Fixed factory overhead: 3.0 DLHs. @ $3.50 per DLH. For January, the company incurred $22,000 of actual fixed overhead costs and recorded a $875 favorable volume variance. The denominator level of activity in direct labor-hours (DLHs) used by Claus in setting the predetermined overhead rate for January is: (E) a. 9,500 DLHs. c. 8,750 DLHs. b. 9,250 DLHs. d. 10,500 DLHs. G & N 9e 83. The Hawkins Company uses a standard costing system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). During February, the company actually used 9,200 direct labor-hours and made 2,900 units of finished product. The standard cost card for one unit of product includes the following: Variable overhead: 3 DLHs @ $4.75 per DLH Fixed overhead: 3 DLHs @ $3.00 per DLH For February, the company incurred $28,450 in fixed overhead costs and recorded a $900 favorable volume variance. The denominator activity level in direct labor-hours used by Hawkins in setting the predetermined overhead rate for February is: A. 9,300 hours. C. 9,000 hours. B. 8,400 hours. D. 8,700 hours. G & N 10e Applied Fixed Overhead 41. The Murray Company makes and sells a single product. The company recorded the following activity and cost data for May: Page 103 of 171

MANAGEMENT ADVISORY SERVICES Number of units completed 45,000 units Standard direct labor-hours allowed per unit of product 1.5 DLHS Budgeted direct labor-hours (denominator activity) 72,000 DLHS Actual fixed overhead costs incurred $66,000 Volume variance $4,275 U The fixed portion of the predetermined overhead rate is $0.95 per direct labor-hour. The amount of fixed manufacturing overhead cost applied to work in process during May was: (E) a. $61,725. c. $42,750. b. $62,700. d. $64,125. G & N 9e 104. The Murray Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct labor-hours (DLHs). The standard calls for 1.5 direct labor-hours per unit of product. The company recorded the following activity and cost data for May: Activity: Number of units produced 40,100 Units Denominator activity 64,000 DLHs Cost: Actual fixed overhead costs incurred $56,000 Volume variance $3,465 Unfavorable Fixed portion of the predetermined overhead rate $0.90 per DLH The amount of fixed manufacturing overhead cost applied during May was: (E) A. $52,535. C. $36,090. B. $54,135. D. $50,400. G & N 10e 101. The Chase Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company recorded the following activity and cost data relating to manufacturing overhead for October:

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Activity: Number of units completed 31,200 Units Standard direct labor-hours per unit 1.6 DLHs Denominator activity 54,000 DLHs Cost: Actual fixed overhead costs incurred $51,300 Volume variance $3,468 Unfavorable Fixed portion of the predetermined overhead rate $0.85 per DLH The amount of fixed manufacturing overhead cost applied to work in process during September was: (E) A. $47,832. C. $42,432. B. $26,520. D. $43,605. G & N 10e Fixed Overhead Spending (Budget) Variance 42. The Murray Company makes and sells a single product. The company recorded the following activity and cost data for May: Number of units completed 45,000 units Standard direct labor-hours allowed per unit of product 1.5 DLHS Budgeted direct labor-hours (denominator activity) 72,000 DLHS Actual fixed overhead costs incurred $66,000 Volume variance $4,275 U The fixed portion of the predetermined overhead rate is $0.95 per direct labor-hour. The fixed overhead budget variance for May was: (E) a. $2,400 U. c. $6,000 U. b. $2,400 F. d. $6,000 F. G & N 9e 105. The Murray Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct labor-hours (DLHs). The standard calls for 1.5 direct labor-hours per unit of product. The company recorded the following activity and cost data for May:

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MANAGEMENT ADVISORY SERVICES Activity: Number of units produced 40,100 Units Denominator activity 64,000 DLHs Cost: Actual fixed overhead costs incurred $56,000 Volume variance $3,465 Unfavorable Fixed portion of the predetermined overhead rate $0.90 per DLH The fixed overhead budget variance for May was: (E) A. $8,000 F. C. $1,600 F. B. $8,000 U. D. $1,600 U. G & N 10e 102. The Chase Company has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor-hours (DLHs). The company recorded the following activity and cost data relating to manufacturing overhead for October: Activity: Number of units completed 31,200 Units Standard direct labor-hours per unit 1.6 DLHs Denominator activity 54,000 DLHs Cost: Actual fixed overhead costs incurred $51,300 Volume variance $3,468 Unfavorable Fixed portion of the predetermined overhead rate $0.85 per DLH The fixed overhead budget variance for September was: (E) A. $2,700 favorable. C. $5,400 favorable. B. $2,700 unfavorable. D. $5,400 unfavorable. G & N 10e Fixed Overhead Flexible Budget Variance 185 . Matthew’s Corporation manufactured 10,000 golf bags during March. The fixed overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March. Actual Static Budget Production 10,000 units 12,000 units Machine-hours 5,100 hours 6,000 hours Fixed overhead cost for $122,000 $120,000 March Fixed overhead is (E) CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS a. overallocated by $2,000. b. underallocated by $2,000.

c. overallocated by $22,000. d. underallocated by $22,000. Horngren

Fixed Overhead Spending Variance & Volume Variance 69. STA Company’s standard fixed overhead cost is P3 per direct labor hours based on budgeted fixed costs of P300,000. The standard allows 2 direct labor hours per unit. During 2001, STA produced 55,000 units of product, incurred P315,000 of fixed overhead costs, and recorded 106,000 actual hours of direct labor. What are the fixed overhead variances? (E) Pol Bobadilla A. B. C. D. Fixed OH Spending P15,000 U P33,000 U P15,000 U P33,000 U Variance Fixed OH Volume P30,000 F P30,000 F P18,000 F P18,000 F Variance Budgeted Fixed Overhead 186 . If actual fixed manufacturing overhead was $108,000 and there was a $2,600 unfavorable spending variance and a $2,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been (E) a. $112,600 c. $106,000 b. $110,600 d. $105,400 Applied Fixed Overhead 187 . Fixed manufacturing overhead was budgeted at $400,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $16,000 favorable and the fixed overhead spending variance was $12,000 unfavorable, fixed manufacturing overhead applied must be (E) a. $416,000 d. $388,000 b. $412,000 e. $384,000. c. $404,000 188

. Fixed manufacturing overhead was budgeted at $210,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $8,000 unfavorable and the fixed overhead spending variance was $3,000 favorable, fixed manufacturing overhead applied must be (E) a. $218,000 d. $205,000 Page 105 of 171

MANAGEMENT ADVISORY SERVICES b. $213,000 c. $207,000

STANDARD COSTS AND VARIANCE ANALYSIS e. $202,000

Comprehenaive Questions 111 through 115 are based on the following information. CMA 1292 3-15 to 19 Nanjones Company manufactures a line of products distributed nationally through wholesalers. Presented below are planned manufacturing data for 1992 and actual data for November 1992. The company applies overhead based on planned machine hours using a predetermined annual rate. 1992 Planning Data Annual November Fixed manufacturing overhead $1,200,000 $100,000 Variable manufacturing overhead 2,400,000 220,000 Direct labor hours 48,000 4,000 Machine hours 240,000 22,000

Direct labor hours Machine hours Fixed manufacturing overhead Variable manufacturing overhead * plan based on output 189

November 1992 Data Actual Planned* 4,200 4,000 21,600 21,000 $101,200 $214,000

. The predetermined overhead application rate for Nanjones Company for 1992 is (D) a. $5.00 c. $10.00 b. $25.00 d. $15.00

190

. The total amount of overhead applied to production for November 1992 was (D) a. $316,200. c. $320,000. b. $315,000. d. $300,000.

191

. The amount of over- or under-applied variable manufacturing overhead for November was (D) a. $6,000 over-applied. c. $20,000 over-applied. b. $4,000 under-applied. d. $6,000 under-applied.

192

. The variable overhead spending variance for November 1992 was (D) a. $2,000 favorable. c. $14,000 unfavorable. b. $6,000 favorable. d. $6,000 unfavorable.

193

. The fixed overhead volume variance for November 1992 was (D) a. $1,200 unfavorable. c. $10,000 favorable. b. $5,000 unfavorable. d. $5,000 favorable.

DISPOSITION OF VARIANCES Allocation Method Underapplied Charged to Cost of Goods Sold 194 . Kell Company has the following selected debit balance accounts at the end of the current year: Work-in-Process, $100,000; Finished Goods Inventory, $50,000; Cost of Goods Sold, $150,000; and Factory Overhead, $24,000. If over- or underapplied factory overhead is disposed of by the allocation method, the amount charged to Cost of Goods Sold will be (E) a. $6,000 d. $24,000 b. $12,000 e. $4,000 c. $8,000 H&M Adjusted Cost of Goods Sold 195 . Account balances are as follows: Manufacturing overhead Work in process inventory Finished goods inventory Cost of goods sold

CMA EXAMINATION QUESTIONS

$120,000 underapplied 50,000 150,000 400,000 Page 106 of 171

MANAGEMENT ADVISORY SERVICES If underapplied or overapplied overhead is material and is allocated to Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold (based on ending account balances), Cost of Goods Sold after adjustment would have a balance of (E) a. $720,000 c. $520,000 b. $680,000 d. $480,000 H&M 196

. Worley Company has underapplied overhead of $45,000 for the year ended December 31, 2002. Before disposition of the underapplied overhead, selected December 31, 2002 balances from Worley’s accounting recorded are as follows: Sales $1,200,000 Cost of goods sold 720,000 Inventories: Direct materials 36,000 Work in process 54,000 Finished goods 90,000 Under Worley’s cost accounting system, over- or underapplied overhead is allocated to appropriate inventories and cost of goods sold based on yearend balances. In its 2002 income statement, Worley should report cost of goods sold of (M) A. $682,500 C. $756,000 B. $684,000 D. $757,500

Charged to Finished Goods, DM & DL Component of FG Inventory Questions 1 thru 4 are based on the following information. AICPA adapted Josey Manufacturing Corporation uses a standard cost system that records direct materials at actual cost, records materials price variances at the time that direct materials are issued to work in process, and prorates all variances at year end. Variances associated with direct materials are prorated based on the direct materials balances in the appropriate accounts, and variances associated with direct labor and factory overhead are prorated based on the direct labor balances in the appropriate accounts. The following information is available for Josey for the year ended December 31: Finished goods inventory at December 31: Direct materials $ 87,000 CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Direct labor 130,500 Applied factory overhead 104,400 Direct materials inventory at December 31 65,000 Cost of goods sold for the year ended December 31: Direct materials 348,000 Direct labor 739,500 Applied factory overhead 591,600 Direct materials price variance (unfavorable) 12,500 Direct materials usage variance (favorable) 15,000 Direct labor rate variance (unfavorable) 20,000 Direct labor efficiency variance (favorable) 5,000 Factory overhead incurred 690,000 There were no beginning inventories and no ending work in process inventory. Factory overhead is applied at 80% of standard direct labor cost.

*. The amount of direct materials price variance to be prorated to finished goods inventory at December 31 is a: (M A. $1,740 debit C. $2,610 credit B. $2,500 debit D. $3,000 credit

*. The total amount of direct materials in finished goods inventory at December 31, after all materials variances have been prorated, is: (D) A. $86,500 C. $88,000 B. $87,500 D. $86,000

*. The total amount of direct labor in finished goods inventory at December 31, after all variances have been prorated, is: (D) A. $126,750 C. $132,750 B. $134,250 D. $133,750

*. The total cost of goods sold for the year ended December 31, after all variances have been prorated, is: (D) A. $1,693,850 C. $1,675,450 B. $1,684,750 D. $1,683,270

GROSS PROFIT Page 107 of 171

MANAGEMENT ADVISORY SERVICES .

Alma Company budgeted that factory overhead for 2003 and 2004 would be P60,000 for each year. The predicted and actual activity for 2003 and 2004 were 30,000 and 20,000 direct labor hours, respectively. 2003 2004 Sales in units 25,000 25,000 Selling price per unit P10 P10 Direct materials and direct labor P5 P5 cost per unit The company assumes that the long-run production level is 20,000 direct labor hours per year. The actual factory overhead cost for the end of 2003 and 2004 was P60,000. Assume that it takes one direct labor hour to make one finished unit. When the annual estimated factory overhead rate is used, the gross profits for 2003 and 2004, respectively, are (D) A. P75,000 and P75,000 C. P75,000 and P55,000 B. P125,000 and P125,000 D. P75,000 and P50,000 Pol Bobadilla

JOURNAL ENTRIES Material & Labor Components of Inventories Questions 1 & 2 are based on the following information. CMA adapted Sam Company adopted a standard cost system several years ago. The standard costs for the prime costs of its single product are as follows: Material (8 kilograms x $5.00/kg.) $40.00 Labor (6 hours x $8.20/hr.) $49.20 The operating data in the following column were taken from the records for November: In-process beginning inventory none In-process ending inventory (75% complete as to labor; material is issued at the beginning of processing) 800 units Units completed 5,600 units Budgeted output 6,000 units Purchases of materials 50,000 kilograms Total actual labor costs $300,760 Actual hours of labor 36,500 hours Material usage variance $1,500 unfavorable Total material variance $750 unfavorable CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 197

. The total amount of material and labor cost transferred to the finished goods account for November is: A. $499,520 B. $535,200

C. $550,010 D. $561,040

198

. The total amount of material and labor cost in the ending balance of work in process inventory at the end of November is: A. 0 C. $61,520 B. $9,840 D. $71,360

Material & Labor Variances Questions 61-65 are based on the following information: G & N 10e The Odle Company makes and sells a single product called a Kitt. Odle employs a standard costing system. Each Kitt has a standard cost of 5 pounds of material at $12 per pound and 0.9 direct labor hours at $15 per hour. There were no inventories of any kind of June 1. During June, the following events occurred:  Purchased 17,000 pounds of material at a total cost of $190,000.  Used 15,000 pounds of material to produce 2,400 Kitts.  Used 1,900 hours of direct labor time at a total cost of $38,000.

Page 108 of 171

MANAGEMENT ADVISORY SERVICES 61. To record the incurrence of direct labor cost and its use in production, the general ledger would include what kind of entry to the Labor Rate Variance account? A. $ 9,500 credit. C. $15,200 debit. B. $ 9,500 debit. D. $ 2,000 debit. 62. To record the incurrence of direct labor cost and its use in production, the general ledger would include what kind of entry to the Labor Efficiency Variance account? A. $7,500 credit. C. $5,600 credit. B. $5,600 debit. D. $3,900 credit. 63. Odle Company purchased material on account. The entry to record the purchase of materials will include a: A. credit to Work in Process. C. credit to Accounts Payable. B. debit to Accounts Receivable. D. credit to Raw Materials Inventory. 64. To record the purchase of direct materials, the general ledger would include what kind of entry to the Materials Price Variance Account? A. $14,000 credit. C. $10,000 credit. B. $14,000 debit. D. $10,000 debit. 65. To record the use of direct materials in production, the general ledger would include what kind of entry to the Materials Quantity Variance Account? A. $46,000 debit. C. $60,000 debit. B. $60,000 credit. D. $36,000 debit. Questions 77 thru 80 are based on the following information. G & N 9e The Dexon Company makes and sells a single product called a Mip and employs a standard costing system. The following standards have been established for one unit of Mip: Standard Quantity or Standard Cost per Hours Mip Direct materials 6 board feet $9.00 Direct labor 0.8 hours $9.60 CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS There were no inventories of any kind on August 1. During August, the following events occurred:  Purchased 15,000 board feet at the total cost of $24,000.  Used 12,000 board feet to produce 2,100 Mips.  Used 1,700 hours of direct labor time at a total cost of $20,060. 77. To record the purchase of direct materials, the general ledger would include what entry to the Materials Price Variance Account? (M) a. $1,500 credit c. $6,000 credit b. $1,500 debit d. $6,000 debit 78. To record the use of direct materials in production, the general ledger would include what entry to the Materials Quantity Variance account? (M) a. $3,600 debit c. $900 debit b. $3,600 credit. d. $900 credit 79. To record the incurrence of direct labor cost and its use in production, the general ledger would include what entry to the Labor Rate Variance account? (M) a. $240 credit c. $340 debit b. $240 debit d. $340 credit 80. To record the incurrence of direct labor costs and its use in production, the general ledger would include what entry to the Labor Efficiency Variance account? (M) a. $480 credit c. $1,200 debit b. $240 debit d. $1,200 credit Materials, Labor & Overhead Variances Questions 1 thru 4 are based on the following information. AICPA adapted Kaiser Manufacturing Company uses a standard cost system in accounting for the costs of production of its only product, Product A. The standards for the production of one unit of Product A are as follows: Direct 10 feet of Item 1 at $.78 per foot and 3 feet of Item 2 materials: at $1 per foot Direct labor: 4 hours at $3.60 per hour Factory applied at 150% of standard direct labor costs Page 109 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

overhead: There was no inventory on hand at the end of the year. Materials price variances are isolated at purchase. Following is a summary of costs and related data for the production of Product A during the year:  100,000 feet of Item 1 were purchased at $.75 per foot.  30,000 feet of Item 2 were purchased at $.90 per foot.  8,000 units of Product A were produced that required 78,000 feet of Item 1, 26,000 feet of Item 2, and 31,000 hours of direct labor at $3.50 per hour.  6,000 units of Product A were sold. 199

. The total debits to the direct materials account for the purchase of Item 1 should be: A. $75,000 B. $78,000

200

C. $58,500 D. $60,000

. The total debits to the work in process account for direct labor should be: A. $111,600 C. $112,000 B. $108,500 D. $115,200

201

. Before allocation of standard variances, the balance in the materials quantity variance account of Item 2 was: A. $2,000 debit D. $600 debit B. $1,000 credit E. $1,000 debit C. $2,600 debit

202

. If all standard variances are prorated to inventories and cost of goods sold, the amount of materials quantity variance for Item 2 to be prorated to direct materials inventory would be: A. $500 debit D. $333 credit B. $500 credit E. $333 debit C. 0

Closing of Over (under) Applied Overhead

CMA EXAMINATION QUESTIONS

36. The operations of the Kerry Company resulted in underapplied overhead of $5,000. The entry to close out this balance to Cost of Goods Sold and the effect of the underapplied overhead on Cost of Goods Sold would be: G & N 10e Effect on Cost Entry of Goods Sold A. Manufacturing Overhead 5,00 Deduct $5,000 0 Cost of Goods Sold 5,00 0 B. Cost of Goods Sold 5,00 Deduct $5,000 0 Manufacturing Overhead 5,00 0 C. Cost of Goods Sold 5,00 Add $5,000 0 Manufacturing Overhead 5,00 0 D. Manufacturing Overhead 5,00 Add $5,000 0 Cost of Goods Sold 5,00 0 COMPREHENSIVE Total Variance 29. KNOTTY, Inc. estimated the cost of a project it started in October 19x4 as follows: Direct materials, P495,000; direct labor, 6,000 hours at P30 per hour; variable overhead, P24 per direct labor hour. By the end of the month, all the required materials have been used at P491,900; labor was 80% complete at 4,650 hours at P30 per hour; and, the variable overhead amounted to P113,700. The total variance for the project as at the end of the month was (M) a. P7,500 unfavorable c. P9,000 favorable b. P8,400 unfavorable d. P9,00 favorable RPCPA 1094 Page 110 of 171

MANAGEMENT ADVISORY SERVICES Direct Labor & Variable Overhead Efficiency Variance 27. SUPER Co. at normal capacity, operates at 600,000 labor hours with standard labor rate of P20 per hour. Variable factory overhead is applied at the rate of P12 per labor hour. Four units should be completed in an hour. Last year, 1,350,000 units were produced using 300,000 labor hours. All labor hours were paid at the standard rate, and actual overhead cost consisted of P3,738,000 for variable items and P3,000,000 fixed items. The total labor and overhead costs saved, by producing at more than standard, amounted to (M) a. P450,000 c. P750,000 b. P500,000 d. P1,200,000 RPCPA 0594 DM and DL Variances Questions 127 and 128 are based on the following information. CIA 0595 III-81 & 82 A company manufactures a machine component called Omega. The following relates to manufacturing operations in May. Planned production 2,000 units of Omega Actual production 2,100 units of Omega Standard costs per unit of Omega Direct materials $20 (5 lbs. @ $4) Direct labor $10 (1 hr. @ $10) Actual costs incurred Direct materials purchased $44,772 (10,920 lbs. @ and used $4.10) Direct labor $20,500 (2,000 hr. @ $10.25) 203

. The direct materials efficiency variance was (E) A. $1,092 unfavorable. C. $3,680 unfavorable. B. $1,680 unfavorable. D. $3,772 unfavorable.

204

. The direct labor flexible budget variance was (E) A. $500 favorable. C. $1,000 favorable.

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS B. $500 unfavorable.

D. $0

Questions 129 and 130 are based on the following information. RPCPA 1082 The Sta. Anita Company has a budgeted normal monthly capacity of 5,000 labor hours with a standard production of 4,000 units are 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 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 material price variance during September was (M) a. P1,440 unfavorable d. P3,440 unfavorable b. P204 favorable e. None of the above c. P140 favorable *. The labor efficiency variance was (E) a. P2,250 unfavorable c. P2,187.50 favorable b. P1,000 unfavorable d. P62.50 favorable Questions 131 through 133 are based on the following information. CIA 0594 III72 to 74 A company manufactures one product and has a standard cost system. In April the company had the following experience: Direct Materials Direct Labor Actual $/unit of input (lbs. & hrs.) $28 $18 Standard price/unit of input $24 $20 Standard inputs allowed per unit 10 4 of output Actual units of input 190,000 78,000 Actual units of output 20,000 20,000 205

. The direct materials price variance for April is (M) Page 111 of 171

MANAGEMENT ADVISORY SERVICES A. $760,000 favorable. B. $760,000 unfavorable.

STANDARD COSTS AND VARIANCE ANALYSIS C. $240,000 unfavorable. D. $156,000 favorable.

206

. The direct materials efficiency variance for April is (M) A. $156,000 favorable. C. $240,000 unfavorable. B. $240,000 favorable. D. $760,000 unfavorable.

207

. The direct labor rate variance for April is (E) A. $240,000 favorable. C. $156,000 favorable. B. $156,000 unfavorable. D. $40,000 unfavorable.

Questions 32 thru 34 are based on the following information. H&M Rinker Company produced 100 units of Product X. The total standard and actual costs for materials and direct labor for the 100 units of Product X are as follows: Raw materials: Standard Actual Standard: 100 pounds at $2.00 per $200 pound Actual: 110 pounds at $1.90 per $209 pound Direct labor: Standard: 200 hours at $10 per hour 2,000 Actual: 184 hours at $11 per hour 2,024 208

. What is the material usage variance for Rinker Company? a. $9 (U) d. $11 (U) b. $20 (F) e. $20 (U) c. $11 (F)

CMA EXAMINATION QUESTIONS

209

. What is the material price variance for Rinker Company? a. $9 (U) d. $11 (U) b. $20 (F) e. $20 (U) c. $11 (F)

210

. What is the labor efficiency variance for Rinker Company? a. $160 (U) d. $160 (F) b. $184 (F) e. $24 (U) c. $184 (U)

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MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Questions 134 through 137 are based on the following information. CMA 1291 3-1 to 4 Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. Standard Standard Price Standard Cost Quantity Direct materials 8 pounds $1.80 per pound $14.40 Direct labor . 25 hour 8.00 per hour 2.00 $16.40 During November, Arrow purchased 160,000 pounds of direct materials at a total cost of $304,000. The total factory wages for November were $42,000, 90% of which were for direct labor. Arrow manufactured 19,000 units of product during November using 142,500 pounds of direct materials and 5,000 direct labor hours.

Questions 138 through 141 are based on the following information. CMA 0692 3-18 to 21 Jackson Industries, which employs a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for the prime costs of one unit of product. During May, Jackson purchased 125,000 pounds of direct materials at a total cost of $475,000. The total factory wages for May were $364,000, 90% of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct materials and 28,000 direct labor hours. Standard Standard Price Standard Quantity Cost Direct materials 5 pounds $3.60/pound $18.00 Direct labor 1.25 hours $12.00/hr. 15.00 $33.00

211

. The direct materials purchase price variance for November is (E) A. $16,000 favorable. C. $14,250 favorable. B. $16,000 unfavorable. D. $14,250 unfavorable.

215

212

. The direct materials usage (quantity) variance for November is (E) A. $14,400 unfavorable. C. $17,100 unfavorable. B. $1,100 favorable. D. $17,100 favorable.

. The purchase price variance for the direct materials acquired by Jackson Industries during May is (E) a. $21,600 favorable. c. $28,000 favorable. b. $25,000 unfavorable. d. $21,600 unfavorable.

216

. The direct labor price (rate) variance for November is (E) A. $2,200 favorable. C. $2,000 unfavorable. B. $1,900 unfavorable. D. $2,090 favorable.

. The direct materials usage (quantity) variance for May is (E) A. $7,200 unfavorable. C. $5,850 unfavorable. B. $7,600 favorable. D. $7,200 favorable.

217

. The direct labor usage (efficiency) variance for November is (E) A. $2,200 favorable. C. $2,000 unfavorable. B. $2,000 favorable. D. $1,800 unfavorable.

. The direct labor price (rate) variance for May is (E) A. $8,400 favorable. C. $8,400 unfavorable. B. $7,200 unfavorable. D. $6,000 favorable.

218

. The direct labor usage (efficiency) variance for May is (E) A. $5,850 favorable. C. $5,850 unfavorable. B. $6,000 unfavorable. D. $6,000 favorable.

213

214

Questions 78-82 are based on the following information: G & N 10e The Geurtz Company uses standard costing. The company makes and sells a single product called a Roff. The following data are for the month of August:  Actual cost of direct material purchased and used: $65,560 CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES        

STANDARD COSTS AND VARIANCE ANALYSIS

Material price variance: $5,960 unfavorable Total materials variance: $22,360 unfavorable Standard cost per pound of material: $4 Standard cost per direct labor hour: $5 Actual direct labor hours: 6,500 hours Labor efficiency variance: $3,500 favorable Standard number of direct labor hours per unit of Roff: 2 hours Total labor variance: $400 unfavorable

78. The total number of units of Roff produced during August was: A. 10,800. C. 3,600. B. 14,400. D. 6,500. 79. The standard material allowed to produce one unit of Roff was: A. 1 lb. C. 3 lbs. B. 4 lbs. D. 2 lbs. 80. The actual material cost per pound was: A. $4.00. C. $3.30. B. $3.67. D. $4.40. 81. The actual direct labor rate per hour was: A. $ 5.60. C. $10.00. B. $ 5.00. D. $ 4.40. 82. The labor rate variance was: A. $3,900 favorable. B. $3,900 unfavorable.

C. $3,100 unfavorable. D. $3,100 favorable.

Questions 52 through 55 are based on the following information. Barfield The following July information is for Kingston Company: Standards: Material 3.0 feet per unit @ $4.20 per foot Labor 2.5 hours per unit @ $7.50 per hour Actual: Production 2,750 units produced during the month Material 8,700 feet used; 9,000 feet purchased @ $4.50 per CMA EXAMINATION QUESTIONS

foot Labor 7,000 direct labor hours @ $7.90 per hour (Round all answers to the nearest dollar.) 52. What is the material price variance (calculated at point of purchase)? a. $2,700 U c. $2,610 F b. $2,700 F d. $2,610 U 53. What is the material quantity variance? a. $3,105 F c. $3,105 U b. $1,050 F d. $1,890 U 54. What is the labor rate variance? a. $3,480 U b. $3,480 F

c. $2,800 U d. $2,800 F

55. What is the labor efficiency variance? a. $1,875 U c. $1,875 U b. $938 U d. $1,125 U Questions 61 through 64 are based on the following information. Barfield The following March information is available for Batt Manufacturing Company when it produced 2,100 units: Standard: Material 2 pounds per unit @ $5.80 per pound Labor 3 direct labor hours per unit @ $10.00 per hour Actual: Material 4,250 pounds purchased and used @ $5.65 per pound Labor 6,300 direct labor hours at $9.75 per hour 61. What is the material price variance? a. $637.50 U c. $630.00 U b. $637.50 F d. $630.00 F 62. What is the material quantity variance? a. $275 F c. $290 U Page 114 of 171

MANAGEMENT ADVISORY SERVICES b. $290 F 63. What is the labor rate variance? a. $1,575 U b. $1,575 F

STANDARD COSTS AND VARIANCE ANALYSIS d. $275 U c. $1,594 U d. $0

64. What is the labor efficiency variance? a. $731.25 F c. $750.00 F b. $731.25 U d. none of the above Questions 57 thru 60 are based on the following information. G & N 9e Bryan Company employs a standard cost system in which direct materials inventory is carried at standard cost. Bryan has established the following standards for the prime costs of one unit of product: Standard Standard Price Standard Quantity Cost Direct 6 pounds $ 3.50/pound $21.00 materials .... Direct 1.3 hours $11.00/hour 14.30 labor ........ $35.30 During March, Bryan purchased 165,000 pounds of direct material at a total cost of $585,750. The total factory wages for March were $400,000, 90 percent of which were for direct labor. Bryan manufactured 25,000 units of product during March using 151,000 pounds of direct material and 32,000 direct labor hours. 57. The price variance for the direct material acquired by the company during March is: (M) a. $7,550 favorable. c. $7,550 unfavorable. b. $8,250 unfavorable. d. $8,250 favorable. 58. The direct material quantity variance for March is: (M) a. $3,500 unfavorable. c. $3,500 favorable. b. $3,550 favorable. d. $3,550 unfavorable. 59. The direct labor rate variance for March is: (E) CMA EXAMINATION QUESTIONS

a. $ 8,000 favorable. b. $48,000 unfavorable.

c. $ 8,000 unfavorable. d. $48,000 favorable.

60. The direct labor efficiency variance for March is: (E) a. $5,625 unfavorable. c. $5,625 favorable. b. $5,500 favorable. d. $5,500 unfavorable. Questions 81 thru 84 are based on the following information. G & N 9e The Alpha Company produces toys for national distribution. Standards for a particular toy are: Materials: 12 ounces per unit at 56¢ per ounce. Labor: 2 hours per unit at $2.75 per hour. During the month of December, the company produced 1,000 units. Information for the month follows:  Materials: 14,000 ounces were purchased and used at a total cost of $7,140.  Labor: 2,500 hours worked at a total cost of $8,000. 81. The materials price variance is: (E) a. $700 U. b. $420 U.

c. $420 F. d. $700 F.

82. The materials quantity variance is: (E) a. $1,120 U. c. $1,820 U. b. $1,820 F. d. $1,120 F. 83. The labor rate variance is: (E) a. $2,500 F. b. $1,125 F.

c. $1,125 U. d. $2,500 U.

84. The labor efficiency variance is: (E) a. $1,600 U. b. $1,375 U.

c. $1,375 F. d. $1,600 F.

Questions 56 through 60 are based on the following information. Barfield Timothy Company has the following information available for October when 3,500 units were produced (round answers to the nearest dollar). Page 115 of 171

MANAGEMENT ADVISORY SERVICES Standards: Material Labor Actual: Material purchased Material used Labor

STANDARD COSTS AND VARIANCE ANALYSIS

3.5 pounds per unit @ $4.50 per pound 5.0 hours per unit @ $10.25 per hour 12,300 pounds @ $4.25 11,750 pounds 17,300 direct labor hours @ $10.20 per hour

56. What is the labor rate variance? a. $875 F b. $865 F

c. $865 U d. $875 U

Direct materials purchased Direct materials used Direct labor used

13,400 gallons at $4.10 per gallon 12,600 gallons 2,800 hours at $7.65 per hour

70. The material price variance for September was: A. $1,340 favorable. C. $1,260 unfavorable. B. $1,260 favorable. D. $1,340 unfavorable. 71. The material quantity variance for September was: A. $2,460 unfavorable. C. $2,400 unfavorable. B. $5,600 unfavorable. D. $5,740 unfavorable.

57. What is the labor efficiency variance? a. $2,050 F c. $2,040 U b. $2,050 U d. $2,040 F

72. The labor rate variance for September was: A. $1,530 unfavorable. C. $ 280 favorable. B. $ 980 favorable. D. $ 980 unfavorable.

58. What is the material price variance (based on quantity purchased)? a. $3,075 U c. $2,938 F b. $2,938 U d. $3,075 F

73. The labor efficiency variance for September was: A. $33,600 favorable. C. $22,400 favorable. B. $ 1,600 favorable. D. $ 3,200 favorable.

59. What is the material quantity variance? a. $2,250 F c. $225 F b. $2,250 U d. $2,475 U

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 111 THROUGH 113. Horngren Ruben’s Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Variances Flexible Price Efficiency Budget Material A $20,000 $1,000F $3,000U Material B 30,000 500U 1,500F Direct manufacturing 40,000 500U 2,500F labor

60. Assume that the company computes the material price variance on the basis of material issued to production. What is the total material variance? a. $2,850 U c. $5,188 F b. $5,188 U d. $2,850 F Questions 70-73 are based on the following information: G & N 10e The Thompson Company uses standard costing and has established the following direct material and direct labor standards for each unit of Lept. Direct materials 2 gallons at $4 per gallon Direct labor 0.5 hours at $8 per hour During September, the company made 6,000 Lepts and incurred the following costs: CMA EXAMINATION QUESTIONS

111. The MOST likely explanation of the above variances for Material A is that (M) a. a lower price than expected was paid for Material A. b. higher-quality raw materials were used than were planned. Page 116 of 171

MANAGEMENT ADVISORY SERVICES d. the company used a higher-priced supplier. d. Material A used during September was $2,000 less than expected. 219

. The actual amount spent for Material B was (E) a. $28,000. c. $30,000. b. $29,000. d. $31,000.

113. The MOST likely explanation of the above direct manufacturing labor variances is that (M) a. the average wage rate paid to employees was less than expected. b. employees did not work as efficiently as expected to accomplish the job. c. the company may have assigned more experienced employees this month than originally planned. d. management may have a problem with budget slack and be using lax standards for both labor-wage rates and expected efficiency.

STANDARD COSTS AND VARIANCE ANALYSIS THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 96 THROUGH 100. Horngren Robb Industries Inc. (RII) developed standard costs for direct material and direct labor. In 2004, RII estimated the following standard costs for one of their major products, the 10-gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.10 pounds $30 per pound Direct labor 0.05 hours $15 per hour During June RII produced and sold 5,000 containers using 490 pounds of direct materials at an average cost per pound of $32 and 250 direct manufacturing labor-hours at an average wage of $15.25 per hour. 220

. June’s direct material flexible-budget variance is (E) a. $980 unfavorable. c. $680 unfavorable. b. $300 favorable. d. none of the above.

221

. June’s direct material price variance is (E) a. $980 unfavorable. c. $680 favorable. b. $300 favorable. d. none of the above.

222

. June’s direct material efficiency variance is (E) a. $980 unfavorable. c. $680 favorable. b. $300 favorable. d. none of the above.

223

. June’s direct manufacturing labor price variance is (E) a. $62.50 unfavorable. c. $3,811.75 unfavorable. b. $62.50 favorable. d. none of the above.

224

. June’s direct manufacturing labor efficiency variance is a. $62.50 unfavorable. c. $3,811.75 unfavorable. b. $62.50 favorable. d. none of the above.

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 101 THROUGH 106. Horngren

CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES

Sawyer Industries Inc. (SII) developed standard costs for direct material and direct labor. In 2004, SII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour During July SII produced and sold 10,000 containers using 2,200 pounds of direct materials at an average cost per pound of $24 and 1,050 direct manufacturing labor hours at an average wage of $14.75 per hour. 225

226

227

228

. July’s direct material flexible-budget variance is (E) a. $2,800 unfavorable. c. $5,000 unfavorable. b. $2,200 favorable. d. none of the above. . July’s direct material price variance is (E a. $2,800 favorable. c. $5,000 unfavorable. b. $2,200 favorable. d. none of the above. . July’s direct material efficiency variance is (E) a. $2,800 unfavorable. c. $5,000 unfavorable. b. $2,200 favorable. d. none of the above. . July’s direct manufacturing labor flexible-budget variance is (E) a. $750.00 unfavorable. c. $487.50 unfavorable. b. $262.50 favorable. d. none of the above.

229

. July’s direct manufacturing labor price variance is (E) a. $750.00 unfavorable. c. $487.50 favorable. b. $262.50 favorable. d. none of the above.

230

. July’s direct manufacturing labor efficiency variance is a. $750.00 unfavorable. c. $487.50 favorable. b. $262.50 favorable. d. none of the above.

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Questions 66-69 are based on the following information: G & N 10e Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. Standard Standard Price Standard Cost Quantity Direct materials 8 pounds $1.80 per pound $14.40 Direct labor 0.25 hour $8.00 per hour $ 2.00 During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor hours. 66. The direct material price variance for May is: A. $16,000 favorable. C. $14,250 favorable. B. $16,000 unfavorable. D. $14,250 unfavorable. 67. The direct material quantity variance for May is: A. $14,400 unfavorable. C. $17,100 unfavorable. B. $1,100 favorable. D. $17,100 favorable. 68. The direct labor rate variance for May is: A. $2,200 favorable. C. $2,000 unfavorable. B. $1,900 unfavorable. D. $2,090 favorable. 69. The direct labor efficiency variance for May is: A. $2,200 favorable. C. $2,000 unfavorable. B. $2,000 favorable. D. $1,800 unfavorable. DM & DL Mix & Yield Variances Questions 96 through 101 are based on the following information.

Barfield

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MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Xtra Klean manufactures a cleaning solvent. The company employs both skilled and unskilled workers. Skilled workers class C are paid $12 per hour, while unskilled workers class D are paid $7 per hour. To produce one 55-gallon drum of solvent requires 4 hours of skilled labor and 2 hours of unskilled labor. The solvent requires 2 different materials: A and B. The standard and actual material information is given below: Standard: Material A: 30.25 gallons @ $1.25 per gallon Material B: 24.75 gallons @ $2.00 per gallon Actual: Material A: 10,716 gallons purchased and used @ $1.50 per gallon Material B: 17,484 gallons purchased and used @ $1.90 per gallon Skilled labor hours: 1,950 @ $11.90 per hour Unskilled labor 1,300 @ $7.15 per hour hours: During the current month Xtra Klean manufactured 500 55-gallon drums. (Round all answers to the nearest whole dollar.) 96. What is the total material price variance? a. $877 F c. $931 U b. $877 U d. $931 F 97. What is the total material mix variance? a. $3,596 F c. $4,864 F b. $3,596 U d. $4,864 U 98. What is the total material yield variance? a. $1,111 U c. $2,670 U b. $1,111 F d. $2,670 F 99. What is the labor rate variance? a. $0 b. $1,083 U 100.

What is the labor mix variance?

CMA EXAMINATION QUESTIONS

c. $2,583 U d. $1,083 F

a. $1,083 U b. $2,588 U

c. $1,083 F d. $2,588 F

101. What is the labor yield variance? a. $2,583 U c. $1,138 F b. $2,583 F d. $1,138 U Total Variance and DL Variance Questions 142 and 143 are based on the following information. RPCPA 0583 Edsol Company uses flexible budget in its standard cost system to develop variances. The following selected data are given. Data on standard costs: Raw materials per unit 5 lbs. at P1.00/lb., P5.00 Direct labor per unit 8 hrs. at P3.00/hr., P24.00 Variable factory overhead per unit P3.00 per direct labor hour, P24.00 Fixed factory overhead per month P25,000 Normal activity per month 8,000 direct labor hours Units produced in April 1,000 units Costs incurred for April Raw materials 5,000 lbs. at P1.10/lb. Direct labor 7,000 lbs. at P3.10/hr. Variable factory overhead P27,000 Fixed factory overhead P28,000 *. The total variance to be explained for April is (M) a. P4,200 favorable c. P5,200 favorable b. P4,200 unfavorable d. P5,200 unfavorable *. The labor efficiency variance for April is (M) a. P3,000 favorable c. P3,100 favorable b. P3,000 unfavorable d. P3,100 unfavorable DM and OH Variances Questions 144 through 148 are based on the following information. Gleim Funtime, Inc, manufactures video game machines. Market saturation and technological innovations have caused pricing pressures which have resulted in declining profits. To stem the slide in profits until new products can be introduced, an incentive program has been developed to reward production Page 119 of 171

MANAGEMENT ADVISORY SERVICES managers who contribute to an increase in the number of units produced and effect cost reductions. The managers have responded to the pressure of improving manufacturing in several ways. The video game machines are put together by the Assembly Group which requires parts from both the Printed Circuit Boards (PCB) and the Reading Heads (RH) groups. To attain increased production levels, the PCB and RH groups commenced rejecting parts that previously would have been tested and modified to meet manufacturing standards. Preventive maintenance on machines used in the production of these parts has been postponed with only emergency repair work being performed to keep production lines moving. The more aggressive Assembly Group production supervisors have pressured maintenance personnel to attend to their machines at the expense of other groups. This has resulted in machine downtime in the PCB and RH groups which, when coupled with demands for accelerated parts delivery by the Assembly Group, has led to more frequent parts rejections and increased friction among departments. Funtime operates under a standard cost system. The standard costs for video game machines are as follows: Standard Cost per Unit Cost Item Quantity Cost Total Direct Materials Housing unit 1 $20 $20 Printed circuit boards 2 15 30 Reading heads 4 10 40 Direct labor Assembly group 2 hours 8 16 PCB group 1 hour 9 9 RH group 1.5 hours 10 15 Variable overhead 4.5 hours 2 9 Total standard cost $139 per unit Funtime prepares monthly performance reports based on standard costs. Presented below is the contribution report for May, when production and sales both reached 2,200 units. Funtime Inc. Contribution Report CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS For the Month of May Budget Actual Variance Units 2,000 2,200 200F Revenue $400,000 $440,000 $40,000F Variable costs Direct material 180,000 220,400 40,400U Direct labor 80,000 93,460 13,460U Variable overhead 18,000 18,800 800U Total variable costs 278,000 332,660 54,660U Contribution margin $122,000 $107,340 $14,660U Funtime’s top management was surprised by the unfavorable contribution to overall corporate profits in spite of the increased sales in May. Jack Rath, cost accountant, was assigned to identify to reasons for the unfavorable contribution results as well as the individuals or groups responsible. After review, Rath prepared the Usage Report presented below. Funtime Inc. Usage Report For the Month of May Cost Item Quantity Actual Cost Direct material Housing units 2,200 units $ 44,000 Printed circuit boards 4,700 units 75,200 Reading heads 9,200 units 101,200 Direct labor Assembly 3,900 hours 31,200 Printed circuit boards 2,400 hours 23,760 Reading heads 3,500 hours 38,500 Variable overhead 9,900 hours 18,800 Total variable cost $332,660 Rath reported that the PCB and RH groups supported the increased production levels but experienced abnormal machine downtime, causing idle manpower which required the use of overtime to keep u with the accelerated demand for parts. The idle time was charged to direct labor. Rath also reported that the production managers of these two groups resorted to parts rejections, as opposed to testing and modification procedures formerly applied. Rath Page 120 of 171

MANAGEMENT ADVISORY SERVICES determined that the Assembly Group met management’s objectives by increasing production while using lower than standard hours. 231

. What is the total materials price variance? (M) a. $346,500 favorable. c. $13,900 favorable. b. $346,500 unfavorable d. $13,900 unfavorable.

232

. What is the total materials quantity variance? (M) a. $8,500 unfavorable. c. $9,200 unfavorable. b. $8,500 favorable. d. $9,200 favorable.

233

. What is the variable overhead efficiency variance? (M) a. $0 c. $9,900 unfavorable. b. $900 unfavorable. d. $9,900 favorable.

234

. What is the variable overhead spending variance? (M) a. $1,000 unfavorable. c. $1,800 unfavorable. b. $1,000 favorable. d. $1,800 favorable.

CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS 235

. What is the contribution margin volume variance? (M) a. $9,800 unfavorable. c. $12,200 favorable. b. $9,800 favorable. d. $14,660 unfavorable.

DL and OH Variances Questions 149 through 151 are based on the following information. CMA 0692 3-15 to 17 An organization that specializes in reviewing and editing technical magazine articles. It set the following standards for evaluating the performance of the professional staff: Annual budgeted fixed costs for normal capacity level of $600,00 10,000 articles reviewed and edited 0 Standard professional hours per 10 articles 200 hours Flexible budget of standard labor costs to process 10,000 $10,000,0 articles 00 The following data apply to the 9,500 articles that were actually reviewed and edited during the current year. Total hours used by professional 192,000 hours staff Flexible costs $9,120,000 Total cost 9,738,000 236

. Using a flexible budget, the total cost planned for the review and editing of 9,500 articles should be (D) A. $9,500,000. C. $10,100,000. B. $10,070,000. D. $10,570,000.

237

. The fixed cost spending variance for the year is (D) A. $18,000 unfavorable. C. $48,000 unfavorable. B. $30,000 favorable. D. $18,000 favorable.

238

. The labor efficiency variance for the year is (D) A. $100,000 unfavorable. C. $380,000 favorable. B. $238,000 unfavorable. D. $500,000 favorable.

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MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Questions 152 and 153 are based on the following information. CMA 0693 3-19 & 20 Tiny Tykes Corporation had the following activity relating to its fixed and variable factory overhead for the month of July. Actual costs Fixed overhead $120,000 Variable overhead 80,000

*. What is the standard direct labor time allowed to finish 132,000 units? (E) a. 22,000 hours c. 25,000 b. 24,000 hours d. none of these

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

90,000

Applied (Standard input allowed for actual output achieved x the budgeted rate) Fixed overhead

125,000

Variable overhead spending variance Production volume variance

2,000F 5,000U

239

. If the budgeted rate for applying variable factory overhead was $20 per direct labor hour, how efficient or inefficient was Tiny Tykes Corporation in terms of using direct labor hours as an activity base? (M) a. 100 direct labor hours inefficient. c. 400 direct labor hours inefficient. b. 100 direct labor hours efficient. d. 400 direct labor hours efficient.

240

. The fixed factory overhead efficiency variance is (M) a. $3,000 favorable. c. $5,000 favorable. b. $3,000 unfavorable. d. Never a meaningful variance.

Questions 154 through 156 are based on the following information. RPCPA 1087 The summarized flexible budget of AAA, Inc. is shown below: Percent of Normal Operating Capacity 80% 90% *100% 110% Variable overhead P25,000 P30,000 P35,000 P40,000 Fixed overhead 50,000 50,000 50,000 50,000 CMA EXAMINATION QUESTIONS

Total Factory P75,000 P80,000 P85,000 P90,000 overhead * Normal capacity According to standards established, 150,000 units of the product should be manufactured at its normal capacity. Standard labor time per unit of products is ten minutes. Actual production in 1986 was 132,000 units in 24,000 hours.

*. What is the standard variable factory overhead rate? (E) a. P0.96 c. P1.40 b. P1.00 d. none of the above *. What is the standard fixed factory overhead rate? (E) a. P1.50 c. P2.00 b. P1.75 d. none of the above Questions 157 through 161 are based on the following information. CMA 1294 3-26 to 30 Water Control Inc. manufactures water pumps and uses a standard cost system. The standard factory overhead costs per water pump are based on direct labor hours and are as follows: Variable overhead (4 hours of $8/hour) $32 Fixed overhead (4 hours at $5*/per hour 20 Total overhead cost per unit $52 * Based on a capacity of 100,000 direct labor hours per month. The following additional information is available for the month of November.  22,000 pumps were produced although 25,000 had been scheduled for production.  94,000 direct labor hours were worked at a total cost of $940,000.  The standard direct labor rate is $9 per hour.  The standard direct labor time per unit is 4 hours.  Variable overhead costs were $740,000.  Fixed overhead costs were $540,000. Page 122 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS 242

. The variable overhead spending variance for November was (E) a. $60,000 favorable. c. $48,000 unfavorable. b. $12,000 favorable. d. $40,000 unfavorable.

241

. The fixed overhead spending variance for November was (E) a. $40,000 unfavorable. c. $460,000 unfavorable. b. $70,000 unfavorable. d. $240,000 unfavorable.

243

. The variable overhead efficiency variance for November was (E) a. $48,000 unfavorable. c. $96,000 unfavorable. b. $60,000 favorable. d. $200,000 unfavorable.

244

. The direct labor price variance for November was (E) a. $54,000 unfavorable. c. $60,000 favorable. b. $94,000 unfavorable. d. $148,000 unfavorable.

245

. The direct labor efficiency variance for November was (E) a. $108,000 favorable. c. $60,000 favorable. b. $120,000 favorable d. $54,000 unfavorable.

DL & Variable Overhead Variances Questions 93 thru 97 are based on the following information. G & N 9e 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:.................................. $ 7,000 F Labor efficiency variance:............................ $12,000 F Variable overhead efficiency variance:................ $ 4,000 F Number of units produced:............................. 10,000 Standard labor rate per direct labor hour:............ $12 Standard variable overhead rate per direct labor hour: $4 Actual labor hours used:.............................. 14,000 Actual variable manufacturing overhead costs:......... $58,290 93. The variable overhead spending variance for May was: (M) a. $2,290 F. c. $1,710 F. b. $2,290 U. d. $1,710 U. 94. The actual direct labor rate for May in dollars per hour was: (D) a. $12.50. c. $11.75. b. $12.00. d. $11.50. CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

95. The total standard cost for direct labor for May was: (D) a. $168,000. c. $120,000. b. $180,000. d. $161,000.

3. The actual quantity of raw materials used (in kilos) for the month of June is a. 3,750 kilos c. 6,500 kilos b. 6,000 kilos d. 6,650 kilos

96. The total standard cost for variable overhead for May was: (D) a. $56,000. c. $60,000. b. $40,000. d. $50,000.

4. The actual hours worked for the month of June is a. 1,900 hours c. 2,000 hours. b. 1,905 hours d. 2,100 hours.

97. The standard hours allowed to make one unit of finished product are: (D) a. 1.0. c. 1.5. b. 1.2. d. 2.0.

5. The actual total overhead for the month of June is a. P3,750 c. P6,000 b. P5,750 d. P6,250

DM, DL and OH Variances Questions 3 through 6 are based on the following information. RPCPA 580 The Willard Manufacturing Co., Inc. uses standard cost systems in accounting for manufacturing costs. On June 1, 19x9, it started the manufacture of a new product known as “Whippy.” The standard costs of a unit of “Whippy” are: Raw 3 kilos @ P1.00 per kilo P3.00 materials Direct labor 1 hour @ P4.00 per hour 4.00 Overhead 75% of direct labor cost 3.00 P10.00 The following data were obtained from Willard’s records for the month of June: Actual production of “Whippy” 2,000 units Units sold of “Whippy” 1,250 units

6. The actual direct labor rate for the month of June is a. P3.60 c. P4.00 b. P3.80 d. P4.20

Debit

Credit P25,000

Sales Purchases P13,650 Materials price variance 650 Materials quantity variance 500 Direct labor rate variance 380 Direct labor efficiency variance 400 Manufacturing overhead total variance 250 The amount shown above for the materials price variance is applicable to raw materials purchased during June. CMA EXAMINATION QUESTIONS

Questions 162 through 164 are based on the following information. RPCPA 1088 MAXIM MFG CO., which uses a standard cost system, manufactures one product with the following standard costs: Direct materials 2 Kilos at P10 P20.00 Direct labor 1 hour at P8 8.00 Factory overhead 80% of direct labor 6.40 TOTAL STANDARD UNIT COST P34.40 Total production in units Direct materials purchased Actual quantity of materials used Actual labor cost Factory overhead total variance

10,000 units 22,000 kilos at P11 21,000 kilos 9,500 at P7.50 P1,000 unfavotable

*. The direct material usage variance is (E) a. P11,000 unfavorable c. P10,000 unfavorable b. P20,000 unfavorable d. P40,000 favorable

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MANAGEMENT ADVISORY SERVICES *. The direct labor efficiency variance is (E) a. P4,000 favorable c. P3,750 favorable b. P3,750 unfavorable d. P4,750 favorable *. The actual total factory overhead for the month of January is (D) a. P65,000 c. P57,000 b. P63,000 d. P60,000

STANDARD COSTS AND VARIANCE ANALYSIS a. P800 b. P400

c. P200 d. P4

*. The actual factory overhead for April was (E) a. P500 c. P15,000 b. P5,000 d. P15,500

Questions 165 through 167 are based on the following information. RPCPA 0582 Superior Company, which started business on April 1, uses a standard cost system in accounting for manufacturing costs. The standard costs for a unit of its product are: Materials: 2 units at P3 per kilo P6.00 Labor: 1 hour at P4 per hour 4.00 Factory overhead: 75% of direct labor 3.00 cost P13.00 Following data were gathered from Superior’s records for April: Units produced 5,000 Units sold 4,000 Sales P100,000 Purchases (11,000 kilos) P 38,500 Materials price variance (applicable to April purchases) P550 unfavorable Actual quantity of materials used 10,500 kilos Actual labor hours worked 4,800 hours Direct labor rate variance P800 favorable Factory overhead total variance P500 unfavorable *. The material quantity variance for April was (E) a. P500 c. P1,500 b. P1,000 d. P2,000 *. The direct labor efficiency variance for April was (E) CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES Questions 168 through 171 are based on the following information. CMA 0696 3-22 to 25 Ardmore Enterprises uses a standard cost system in its small appliance division. The standard cost of manufacturing one unit of Zeb is as follows: Materials = 60 pounds at $1.50 per $ 90 pound Labor = 3 hours at $12 per hour 36 Factory overhead – 3 hours at $8 per 24 hour Total standard cost per unit $150 The budgeted variable factory overhead rate is $3 per labor hour, and the budgeted fixed factory overhead is $27,000 per month. During May, Ardmore produced 1,650 units of Zeb compared with a normal capacity of 1,800 units. The actual cost per unit was as follows: Materials (purchased and used) 58 pounds at $1.65 per $95.70 pound) Labor = 3.1 hours at $12 per hour 37.20 Factory overhead – $39,930 per 1,650 units 24.20 Total actual cost per unit $157.10

STANDARD COSTS AND VARIANCE ANALYSIS Questions 172 through 175 are based on the following information. Gleim London Enterprises uses a standard cost system in its appliance division. The standard cost of manufacturing one unit of Gimmicks is as follows: Materials – 120 pounds at $1.50 per pound $180 Labor – 3 hours @ $15 per hour 45 Factory overhead - $16 per labor hour 48 Total standard cost per unit $273 The budgeted variable factory overhead rate is $6 per labor hour, and the budgeted fixed factory overhead is $54,000 per month. During June, London Enterprises produced 1,650 units of Gimmicks compared with a normal capacity of 1,800 units. The actual cost per unit was Materials (purchased and used) – 116 pounds at $1.65 $191.40 per pound Labor – 3.1 hours @ $15 per hour 46.50 Factory overhead ($79,860 for 1,650 units) 48.40 Total standard cost per unit $286,30 250

. The total materials quantity variance for June is (E) a. $9,900 favorable. c. $28,710 favorable. b. $9,900 unfavorable. d. $28,710 unfavorable.

246

. The total materials quantity variance for May is (E) a. $14,355 favorable. c. $4,950 favorable. b. $14,355 unfavorable. d. $4,950 unfavorable.

251

. The materials price variance for June is (E) a. $28,710 unfavorable. c. $28,710 favorable. b. $29,700 unfavorable d. $29,700 favorable.

247

. The materials price variance for May is (E) a. $14,355 unfavorable. c. $14,355 favorable. b. $14,850 unfavorable. d. $14,850 favorable.

252

. The labor rate variance for June is (E) a. $2,700 unfavorable. c. $2,475 unfavorable. b. $2,700 favorable. d. $0

248

. The labor rate variance for May is (E) a. $1,920 favorable. c. $4,950 unfavorable. b. $0. d. $4,950 favorable.

253

. The flexible budget overhead variance for June is (E) a. $0 c. $3,840 unfavorable. b. $6,540 favorable. d. $3,840 favorable.

249

. The flexible overhead variance for May is (E) a. $3,270 unfavorable. c. $1,920 unfavorable. b. $3,270 favorable. d. $1,920 favorable.

Questions xx thru xx are based on the following information. H&M The Wade Company has developed the following standards for one of its products. Direct materials: 20 pounds x $6 per pound

CMA EXAMINATION QUESTIONS

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MANAGEMENT ADVISORY SERVICES Direct labor: 5 hours x $16 per hour Variable manufacturing overhead: 5 hours x $4 per hour The following activity occurred during the month of November: Materials purchased: 250,000 pounds $5.20 per pound Materials used: 220,000 pounds Units produced: 10,000 units Direct labor: 48,000 hours at $15.00 per hour Actual variable manufacturing $204,000 overhead: The company records materials price variances at the time of purchase. 254

. The direct materials price variance is a. $32,000 unfavorable c. $48,000 unfavorable b. $32,000 favorable d. $48,000 favorable

255

. The direct labor efficiency variance is a. $32,000 favorable c. $80,000 unfavorable b. $32,000 unfavorable d. $80,000 favorable

256

257

. The variable manufacturing overhead spending variance is a. $4,000 favorable c. $8,000 favorable b. $4,000 unfavorable d. $12,000 unfavorable . The variable manufacturing overhead efficiency variance is a. $4,000 favorable c. $8,000 favorable b. $4,000 unfavorable d. $12,000 unfavorable

Questions 1 thru 3 are based on the following information. H&M Sheridan Manufacturing Company uses a standard cost system. The following information pertains to 1995. Actual factory overhead costs ($22,000 is fixed) $53,500 Actual direct labor costs (22,500 hours) $175,500 Standard direct labor for 11,000 units: Standard hours allowed 22,000 hrs. Labor rate $8.00 CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS The factory overhead rate is based on an activity level of 10,000 units. Standard cost data or 10,000 units is: Variable factory overhead $30,000 Fixed factory overhead 18,000 Total factory overhead $48,000 258

. What is the total labor budget variance for Sheridan Manufacturing Company? a. $15,500(U) d. $20,000(U) b. $4,000(U) e. $500(F) c. $4,500(F)

259

. What is the variable overhead efficiency variance for Sheridan Manufacturing Company? a. $750 (F) d. $2,250 (F) b. $4,000 (U) e. $2,250 (U) c. $750 (U)

260

. What is the fixed overhead volume variance for Sheridan Manufacturing Company? a. $1,800 (F) d. $1,800 (U) b. $4,800 (F) e. $3,600 (U) c. $5,500 (U)

Questions 56-60 are based on the following information: G & N 10e Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed: Standard Hours or Standard Price or Quantity Rate Direct materials 3 pounds $0.75 per pound Direct labor 0.4 hours $12 per hour Variable manufacturing 0.4 hours $9 per hour overhead During March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable manufacturing overhead is assigned to core tests on the basis of direct labor hours. The following events occurred during March: Page 127 of 171

MANAGEMENT ADVISORY SERVICES    

8,600 pounds of sand were purchased at a cost of $7,310. 7,200 pounds of sand were used for core tests. 840 actual direct labor hours were worked at a cost of $8,610. Actual variable manufacturing overhead incurred was $3,200.

56. The materials price variance for March is: A. $860 unfavorable. C. $281 unfavorable. B. $860 favorable. D. $281 favorable. 57. The materials quantity variance for March is: A. $ 900 favorable. C. $1,950 unfavorable. B. $1,950 favorable. D. $ 900 unfavorable. 58. The labor rate variance for March is: A. $4,578 unfavorable. C. $4,578 favorable. B. $1,470 unfavorable. D. $1,470 favorable. 59. The labor efficiency variance for March is: A. $480 favorable. C. $192 favorable. B. $480 unfavorable. D. $192 unfavorable. 60. The variable overhead efficiency variance for March is: A. $320 unfavorable. C. $360 unfavorable. B. $320 favorable. D. $360 favorable. Materials, Labor & Variable Overhead Variance Questions 61 thru 66 are based on the following information. (Set A) G & N 9e The Litton Company has established standards as follows: Direct material 3 lbs. @ $4/lb. = $12 per unit Direct labor 2 hrs. @ $8/hr. = $16 per unit Variable manuf. overhead 2 hrs. @ $5/hr. = $10 per unit Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased. Units produced 600 Direct material used 2,000 lbs. Direct material purchased (3,000 lbs.) $11,400 Direct labor cost (1,100 hrs.) $ 9,240 CMA EXAMINATION QUESTIONS

STANDARD COSTS AND VARIANCE ANALYSIS Variable manuf. overhead cost incurred $ 5,720 The company applies variable manufacturing overhead to products on the basis of direct labor hours. 61. The materials price variance is: (E) a. $400 U. b. $400 F.

c. $600 F. d. $600 U.

62. The materials quantity variance is: (E) a. $800 U. c. $760 U. b. $4,000 U. d. $760 F. 63. The labor rate variance is: (E) a. $480 F. b. $480 U.

c. $440 F. d. $440 U.

64. The labor efficiency variance is: (E) a. $800 F. b. $800 U.

c. $840 F. d. $840 U.

65. The variable overhead spending variance is: (E) a. $240 U. c. $220 F. b. $220 U. d. $240 F. 66. The variable overhead efficiency variance is: (E) a. $520 F. c. $500 U. b. $520 U. d. $500 F. Questions 67 thru 71 are based on the following information. (Set B) G & N 9e The Albright Company uses standard costing and has established the following standards for its single product: Direct materials .......... 2 gallons at $3 per gallon Direct labor .............. 0.5 hours at $8 per hour Variable manuf. overhead .. 0.5 hours at $2 per hour During November, the company made 4,000 units and incurred the following costs: Direct materials purchased ........ 8,100 gallons at $3.10 per gallon Page 128 of 171

MANAGEMENT ADVISORY SERVICES Direct materials used ............. Direct labor used ................. Actual variable manuf. overhead ...

STANDARD COSTS AND VARIANCE ANALYSIS 7,600 gallons 2,200 hours at $8.25 per hour $4,175

The company applies variable manufacturing overhead to products on the basis of direct labor hours. 67. The material price variance for November was: (E) a. $2,310 U. c. $810 U. b. $2,310 F. d. $810 F. 68. The material quantity variance for November was: (E) a. $1,200 U. c. $300 U. b. $1,200 F. d. $1,500 F. 69. The labor rate variance for November was: (E) a. $1,050 U. c. $2,150 U. b. $550 U. d. $2,150 F. 70. The labor efficiency variance for November was: (E) a. $1,050 U. c. $1,600 F. b. $550 U. d. $1,600 U. 71 The total variable overhead variance for November was: (M) a. $175 U. c. $225 U. b. $225 F. d. $400 U. Questions 72 thru 76 are based on the following information. G & N 9e Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows: Standard Quantity Standard Cost per Bag Direct material 20 pounds $8.00 Direct labor 0.1 hours 1.10 Variable manuf. 0.1 hours .40 overhead .. CMA EXAMINATION QUESTIONS

The company had no beginning inventories of any kind on Jan. 1. Variable manufacturing overhead is applied to production on the basis of direct labor hours. During January, the following activity was recorded by the company:  Production of Fastgro: 4,000 bags  Direct materials purchased: 85,000 pounds at a cost of $32,300  Direct labor worked: 390 hours at a cost of $4,875  Variable manufacturing overhead incurred: $1,475  Inventory of direct materials on Jan. 31: 3,000 pounds 72. The materials price variance for January is: (M) a. $1,640 F. c. $1,700 F. b. $1,640 U. d. $1,300 U. 73. The materials quantity variance for January is: (M) a. $800 U. c. $300 F. b. $300 U. d. $750 F. 74. The labor rate variance for January is: (M) a. $475 F. c. $585 F. b. $475 U. d. $585 U. 75. The labor efficiency variance for January is: (M) a. $475 F. c. $130 U. b. $350 U. d. $110 F. 76. The total variance for variable overhead for January is: (M) a. $85 F. c. $100 U. b. $40 F. d. $125 F. Overhead Variances Questions 65 through 74 are based on the following information. Barfield Redd Co. uses a standard cost system for its production process and applies overhead based on direct labor hours. The following information is available for August when Redd made 4,500 units: Standard: DLH per unit 2.50 Variable overhead per DLH $1.75 Page 129 of 171

MANAGEMENT ADVISORY SERVICES Fixed overhead per DLH Budgeted variable overhead Budgeted fixed overhead Actual: Direct labor hours Variable overhead Fixed overhead

STANDARD COSTS AND VARIANCE ANALYSIS $3.10 $21,875 $38,750 10,000 $26,250 $38,000

65. Using the one-variance approach, what is the total overhead variance? a. $6,062.50 U c. $9,687.50 U b. $3,625.00 U d. $6,562.50 U 66. Using the two-variance approach, what is the controllable variance? a. $5,812.50 U c. $4,375.00 U b. $5,812.50 F d. $4,375.00 F 67. Using the two-variance approach, what is the noncontrollable variance? a. $3,125.00 F c. $3,875.00 F b. $3,875.00 U d. $6,062.50 U 68. Using the three-variance approach, what is the spending variance? a. $4,375 U c. $8,000 U b. $3,625 F d. $15,750 U 69. Using the three-variance approach, what is the efficiency variance? a. $9,937.50 F c. $2,187.50 U b. $2,187.50 F d. $2,937.50 F 70. Using the three-variance approach, what is the volume variance? a. $3,125.00 F c. $3,875.00 U b. $3,875.00 F d. $6,062.50 U 71. Using the four-variance approach, what is the variable overhead spending variance? a. $4,375.00 U c. $8,750.00 U b. $4,375.00 F d. $6,562.50 U CMA EXAMINATION QUESTIONS

72. Using the four-variance approach, what is the variable overhead efficiency variance? a. $2,187.50 U c. $2,187.50 F b. $9,937.50 F d. $2,937.50 F 73. Using the four-variance approach, what is the fixed overhead spending variance? a. $7,000 U c. $750 U b. $3,125 F d. $750 F 74. Using the four-variance approach, what is the volume variance? a. $3,125 F c. $6,063 U b. $3,875 F d. $3,875 U Questions 75 through 84 are based on the following information. Barfield Spots Inc. uses a standard cost system for its production process. Spots applies overhead based on direct labor hours. The following information is available for July: Standard: Direct labor hours per unit 2.20 Variable overhead per hour $2.50 Fixed overhead per hour (based on 11,990 $3.00 DLHs) Actual: Units produced 4,400 Direct labor hours 8,800 Variable overhead $29,950 Fixed overhead $42,300 75. Using the four-variance approach, what is the variable overhead spending variance? a. $7,950 U c. $7,975 U b. $25 F d. $10,590 U 76. Using the four-variance approach, what is the variable overhead efficiency variance? a. $9,570 F c. $2,200 F Page 130 of 171

MANAGEMENT ADVISORY SERVICES b. $9,570 U

STANDARD COSTS AND VARIANCE ANALYSIS d. $2,200 U

77. Using the four-variance approach, what is the fixed overhead spending variance? a. $15,900 U c. $6,930 U b. $6,330 U d. $935 F

Variances

Spending

Efficiency

Variable manufacturing overhead Fixed manufacturing overhead

$ 4,500 F $10,000 U

$15,000 U

ProductionVolume (B)

(A)

$40,000 U

78. Using the four-variance approach, what is the volume variance? a. $6,930 U c. $0 b. $13,260 U d. $2,640 F

111. Above is a (E) a. 4-variance analysis. b. 3-variance analysis.

79. Using the three-variance approach, what is the spending variance? a. $23,850 U c. $14,280 F b. $23,850 F d. $14,280 U

112. In the above chart, the amounts for (A) and (B), respectively, are a. $10,500 U; $55,000 U c. Zero; $55,000 U b. $10,500 U; Zero d. Zero; Zero

80. Using the three-variance approach, what is the efficiency variance? a. $11,770 F c. $7,975 U b. $2,200 F d. $5,775 U 81. Using the three-variance approach, what is the volume variance? a. $13,260 U c. $6,930 U b. $2,640 F d. $0 82. Using the two-variance approach, what is the controllable variance? a. $21,650 U c. $5,775 U b. $16,480 U d. $12,080 U 83. Using the two-variance approach, what is the noncontrollable variance? a. $26,040 F c. $6,930 U b. $0 d. $13,260 U 84. Using the one-variance approach, what is the total variance? a. $19,010 U c. $12,705 U b. $6,305 U d. $4,730 U THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 111 THROUGH 115. Horngren CMA EXAMINATION QUESTIONS

c. 2-variance analysis. d. 1-variance analysis.

261

. In a 3-variance analysis the spending variance should be (E) a. $ 4,500 F. c. $ 5,500 U. b. $10,000 U. d. $10,500 U.

262

. In a 2-variance analysis the flexible-budget variance and the productionvolume variance should be __________, respectively. a. $5,500 U; $55,000 U c. $10,500 U; $50,000 U b. $20,500 U; $40,000 U d. $60,500 U; Zero

263

. In a 1-variance analysis the total overhead variance should be (E) a. $20,500 U. c. $121,000 U. b. $60,500 U. d. none of the above.

Relevant Costing Questions 176 through 182 are based on the following information. Gleim PortCo Products is a divisionalized furniture manufacturer. The divisions are autonomous segments, with each division being responsible for its own sales, costs of operations, working capital management, and equipment acquisition. Each division serves a different market in the furniture industry. Because the markets and products of the divisions are so different, there have never been any transfers between divisions. Page 131 of 171

MANAGEMENT ADVISORY SERVICES The Commercial Division manufactures equipment and furniture that is purchased by the restaurant industry. The division plans to introduce a new line of counter and chair units that feature a cushioned seat with Russ Fiegel of the Office Division. They both believe a cushioned seat currently made by the Office Division for use on its deluxe office stool could be modified for use on the new counter chair. Consequently, Kline has asked Russ Fiegel for a price for 100-unit lots of the cushioned seat. The following conversation took place about the price to be charged for the cushioned seats: Fiegel: “John, we can make the necessary modifications to the cushioned seat easily. The raw materials used in your seat are slightly different and should cost about 10% more than those used in our deluxe office stool. However, the labor time should be the same because the seat fabrication operation basically is the same. I would price the seat at our regular rate – full cost plus 30% markup.” Kline: “That’s higher than I expected, Russ. I was thinking that a good price would be your variable manufacturing costs. After all, your capacity costs will be incurred regardless of this job.” Fiegel: “John, I’m at capacity. By making the cushion seats for you, I’ll have to cut my production of deluxe office stools. Of course, I can increase my production of economy office stools. The labor time freed by not having to fabricate the frame or assemble the deluxe stool can be shifted to the frame fabrication and assembly of the economy office stool. Fortunately, I can switch my labor force between these two models of stools without any loss of efficiency. As you know, overtime is not a feasible alternative in our community. I’d like to sell it to you at variable cost, but I have excess demand for both products. I don’t mind changing my product mix to the economy model if I get a good return on the seats I make for you. Here are my standard costs for the two stools and a schedule of my manufacturing overhead.: Kline: “I guess I see your point, Russ, but I don’t want to price myself out of the market. Maybe we should talk to Corporate to see if they can give us any guidance.”

STANDARD COSTS AND VARIANCE ANALYSIS Office Division Standard Costs and Prices Deluxe Office Stool Raw materials Framing Cushioned seats Padding Vinyl Molded seat (purchased) Direct labor

$ 8.15

$ 9.76

2.40 4.00 -

6.00

3.75 (0.5x$7.50/DLH)

3.75

Cushion 3.75 fabrication(0.5x$7.50/DLH) Assembly 3.75 (0.3x$7.50/DLH) fabrication(0.5x$7.50/DLH) Mfg. Overhead (1.5DLH x 19.20 (0.8x$12.80/DLH $12.80/DLH) ) Total standard cost $45.00 Selling price (30% markup) $58.50 *Attaching seats to frames and attaching rubber feet

-

Frame fabrication(0.5x$7.50/DLH)

2.25 10.24 $32.00 $41.60

Office Division Manufacturing Overhead Budget Overhead Item Supplies Indirect labor Supervision Power Heat and light Property taxes

CMA EXAMINATION QUESTIONS

Economy Office Stool

Nature Amount Variable – at current market prices $420,000 Variable 375,000 Nonvariable 250,000 Use varies with activity; rates are fixed 180,000 Nonvariable – light is fixed regardless of 140,000 production while heat/air-conditioning varies with fuel charges Nonvariable – any change in 200,000 Page 132 of 171

MANAGEMENT ADVISORY SERVICES and insurance taxes Depreciation

amounts/rates is independent of production Fixed dollar total

Employment benefits

20% of supervision, direct and indirect labor Total overhead Capacity in DLH Overhead rate/DLH

STANDARD COSTS AND VARIANCE ANALYSIS 264

1,700,00 0 575,0 00 $3,840,0 00 300,0 00 $12. 80

. What amount of employee benefits is associated with direct labor costs? (M) a. $675,000 c. $450,000 b. $75,000 d. $500,000

265

. What is the variable manufacturing overhead rate? (M) a. $7.80/hr. c. $5.17/hr. b. $11.25/hr. d. $5.00/hr.

266

. What is the transfer price per 100-unit lot based on variable manufacturing costs to produce the modified cushioned seat? (M) a. $1,329 c. $789 b. $1,869 d. $1,986

267

. What is the fixed manufacturing overhead rate? (M) a. $7.80/hr. c. $5.17/hr. b. $11.25/hr. d. $5.00/hr.

268

. How many economy office stools can be produced with the labor hours currently used to make 100 deluxe stools? (M) a. 80. c. 100. b. 125. d. 150.

269

. When computing the opportunity cost for the deluxe office stool, what is the contribution margin per unit produced? (M) a. $25.20 c. $13.56 b. $15.84 d. $33.30

270

. What is the opportunity cost of the Office Division if 125 economy stools can be made in the time required for 100 deluxe stools? a. $789 c. $1,329 b. $1,869 d. $540

Questions 48 through 51 are based on the following information Barfields The following information is provided for the IHM Co. for June 2001. Actual Standard 1,800 units 5 DLHs per unit @ $10.00 per CMA EXAMINATION QUESTIONS

Page 133 of 171

MANAGEMENT ADVISORY SERVICES

8,900 DLHs @ $10.50 per DLH Variable OH $6,400 Fixed OH $17,500

STANDARD COSTS AND VARIANCE ANALYSIS 272

. Ralph Inc. had the following variances for the most recent month: Direct Labor Rate Variance $14,560 U Direct Labor Efficiency Variance $ 3,660 U Variable Overhead Spending Variance $12,320 F Other information included: actual wages paid $105,560; materials purchased $124,860; standards per unit were 2 labor hours at $5 per hour and variable overhead at $6 per hour.

DLH VOH rate per DLH $ .75 FOH rate per DLH $1.90 Budgeted FOH $16,910

48. What is the price variance? a. $4,450 F b. $4,450 U

c. $1,000 F d. $1,000 U

49. What is the efficiency variance? a. $4,450 F b. $4,450 U

c. $1,000 F d. $1,000 U

50. What is the spending variance? a. $590 U b. $590 F

c. $190 F d. $190 U

51. What is the volume variance? a. $590 U b. $590 F

c. $190 F d. $190 U

Required: a. Find the units produced. b. Find the standard labor hours. c. Find the actual labor hours. d. Find the variable overhead efficiency variance. e. Find the actual variable overhead.

D, L & H 9e

273

. Gagne Company uses the following equation to budget manufacturing overhead. Manufacturing overhead = $600,000 + $2 per direct labor hour Gagne has budgeted 300,000 direct labor hours for the year. Actual results were 320,000 direct labor hours and $1,249,000 total manufacturing overhead.

271

. Toimi Inc. had the following variances for the most recent month: Materials Price Variance $3,500 U Materials Usage Variance $ 720 F Direct Labor Rate Variance $5,770 F Direct Labor Efficiency Variance $6,980 U Other information included: actual wages paid $72,310; materials purchased $130,760; standards per unit were 2 labor hours at $5 per hour, 3 pounds at $6 per pound. There were no changes in materials inventories. Required: a. Find the units produced. b. Find the standard labor hours. c. Find the actual labor hours. d. Find the standard quantity of materials allowed. e. Find the actual quantity of materials used.

CMA EXAMINATION QUESTIONS

Required: D, L & H 9e a. Find the predetermined overhead rate. b. Find total overhead applied for the year. c. Compute (overapplied underapplied) overhead and circle the correct direction. d. Find the overhead budget variance and state whether favorable or unfavorable. e. Compute the volume variance and state whether favorable or unfavorable

D, L & H 9e 274

. Bruno Company uses the following equation to budget manufacturing overhead. Manufacturing overhead = $200,000 + $3 per direct labor hour Bruno has budgeted 100,000 direct labor hours for the year. Actual results were 90,000 direct labor hours and $457,000 total manufacturing Page 134 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

overhead.

Variable overhead rate

Required: D, L & H 9e a. Find the predetermined overhead rate. b. Find total overhead applied for the year. c. Compute (overapplied underapplied) overhead and circle the correct direction. d. Find the overhead budget variance and state whether favorable or unfavorable. e. Compute the volume variance and state whether favorable or unfavorable

Budgeted fixed overhead Total actual overhead cost Fixed overhead budget variance Variable overhead efficiency variance Actual direct labor-hours worked Denominator activity level Standard hours per unit

275

. Tracton Corporation uses a standard costing system in which manufacturing overhead costs are applied to products on the basis of machine time. REQUIRED: (D) N&G a. Several numbers and labels have been omitted from the analysis of fixed overhead below. Supply the missing numbers and labels. Fixed Overhead Cost Flexible Budget Applied to Work in ? Fixed Overhead Cost Process $ __?____ $ __?____ 302,100 MH x $1.08 $ __?____ Budget Variance, ? $1,880 U $ __?____ Total variance, $388 F b. Suppose that 6 minutes of machine time is standard per unit of production. How many units were actually produced in the situation above? c. Again suppose that 6 minutes of machine time is standard per unit of production. How many units of production were assumed when the predetermined application rate for fixed overhead was established?

276

..You have just been hired as the controller of the Eastern Division of Global Manufacturing. Performance records for last year are incomplete, with only the following data available:

CMA EXAMINATION QUESTIONS

$3.00 per direct laborhour $84,800 $262,500 $7,200 unfavorable $15,000 unfavorable 55,000 direct laborhours 53,000 direct laborhours 2 direct labor-hours

REQUIRED: (D) N&G Prepare a complete analysis of manufacturing overhead for the past year. Indicate actual, standard, and denominator activity levels; variable overhead spending and efficiency variances; and fixed overhead budget and volume variances. FLEXIBLE BUDGET 277 . Bay City estimates production overhead costs equal to $200,000 + $4X + $7Y, where X is the number of direct labor hours used and Y is the number of machine hours used. Bay City budgeted 20,000 direct labor hours and 50,000 machine hours for 20X2. Bay City produced 30,000 units in 20X2, each requiring 1 direct labor hour and 2.5 machine hours. Actual production costs were $890,000. Required: D, L & H 9e a. Calculate the flexible budget allowance for production overhead costs for 20X2. b. Find the amount and direction of the budget variance for 20X2 for production overhead. (favorable unfavorable) Circle one answer. 278

. Westrum estimates production overhead costs equal to $300,000 + $2X, where X is the number of machine hours used. Westrum budgeted 40,000 machine hours for 20X4. Westrum produced 23,000 units in 20X4, each requiring 3 machine hours. Actual production costs were $420,000. Page 135 of 171

MANAGEMENT ADVISORY SERVICES

STANDARD COSTS AND VARIANCE ANALYSIS

Required: D, L & H 9e a. Calculate the flexible budget allowance for production overhead costs for 20X4. b. Find the amount and direction of the budget variance for 20X4 for production overhead. (favorable unfavorable) Circle one answer.

CMA EXAMINATION QUESTIONS

Page 136 of 171

1

. Answer (A) is correct. Overhead was budgeted at $756,000 based on a budgeted labor cost of $432,000 ($7.20 x 60,000 hours). Thus, $1.75 of overhead was applied for each $1 of labor cost. Given actual labor costs of $450,000, $787,500 ($1.75 x $450,000) of overhead was applied during the period. Actual overhead was $775,000, so $12,500 ($787,500 $775,000) was overapplied. Answer (B) is incorrect because $18,000 is the difference between budgeted direct labor cost at 60,000 direct labor hours and actual direct labor cost ($450,000 - $432,000). Answer (C) is incorrect because $19,000 is the difference between budgeted overhead ($756,000) and the actual overhead ($775,000). Answer (D) is incorrect because $37,000 is the sum of the difference between budgeted overhead ($756,000) and the actual overhead ($775,000) and the difference between the applied overhead ($787,500) and the budgeted overhead ($756,000).

2

. REQUIRED: The overapplied factory O/H for the period. DISCUSSION: (C) Nil Co. applies factory O/H using a predetermined O/H rate, based on direct labor cost. O/H was budgeted for $600,000 based on a budgeted labor cost of $300,000 ($6 x 50,000 hrs.) Thus, $2 of O/H was applied for each $1 of labor. Given actual labor cost of $325,000, $650,000 (2 x $325,000) was applied during the period. Actual O/H was $620,000, so $30,000 ($650,000 – $620,000) was over-applied. Answer (A) is incorrect because $20,000 is the difference between budgeted and actual factory O/H. Answer (B) is incorrect because $25,000 is the difference between budgeted direct labor costs and actual direct labor costs. Answer (D) is incorrect because $50,000 is the difference between the applied O/H and the budgeted amount.

3

. Answer (B) is correct. Pane applies overhead to products on the basis of direct labor cost. The rate is 1.4 ($448,000 budgeted OH ÷ $320,000 budgeted DL cost). Thus, $483,000 (1.4 x $345,000 actual DL cost) of overhead was applied, of which $24,000 ($483,000 - $459,000 actual OH) was overapplied. Answer (A) is incorrect because $11,000 equals the difference between budgeted and actual overhead. Answer (C) is incorrect because $11,000 equals the difference between budgeted and actual overhead. Answer (D) is incorrect because the overhead was overapplied.

4

. Applied overhead ($9 x 30,000)$270,000Actual overhead 240,000Overapplied overhead$ 30,000

5

. Answer (D) is correct. The volume variance (VV) arises from the difference between budgeted fixed O/H and the fixed O/H applied at the standard rate based on the standard input allowed for actual output. The O/H rate is $15 per machine hour ($480,000 ÷ 32,000). VV = Budgeted Fixed O/H - Applied Fixed O/H$6,360 = $480,000 - ($15 x AH) $15 x AH = $480,000 - $6,360 AH = $473,640 ÷ $15 AH = 31,576. Answer (A) is incorrect because 32,425 assumes the volume variable was favorable. Answer (B) is incorrect because the actual machine hours can be found by using the following equation: Volume Variance = Budgeted Fixed O/H - Applied Fixed O/H. The applied fixed O/H is equal to the O/H rate multiplied by the actual hours. The O/H rate is found by dividing the budgeted O/H ($480,000) by the budgeted hours (32,000). Actual machine hours are 31,576. Answer (C) is incorrect because 32,000 equals the budgeted machine hours.

6

.

[(11,250 / 225) x 5.25 x $40] – [(11,250 / 250) x 5 x $40] = $1,500 (U)

7

.

(11,250 / 225) x 5.25 x ($38 - $40) = $525 (F)

8

.

$1,500 (U) + $525 (F) = $975 (U)

9

.

$14,000 - $14,400 = $400 (U)

10

. Normal setup hours = (15,000 / 250) x 5 = 300 hours OH rate = $14,400 / 300 = $48 per setup hour

$14,400 – [(11,250 / 250) x 5 x $48] = $3,600 (U) 11

.

(92,000 units x $10) - (90,000 units x $10) = $20,000 F

12

.

$450,800 - $432,000 = $18,800 U

13

.

Actual ResultsStatic BudgetStatic-budget VarianceUnits sold92,00090,000Revenues$920,000$900,000$20,000 FVariable costs450,800432,00018,800 UContribution margin$469,200$468,000$1,200 FFixed costs95,000100,000(5,000) FOperating income$374,200$368,000$6,200 F 14 . (495,000 units x $10) - (500,000 units x $10) = $50,000 U 15

.

$1,250,000 - $1,500,000= $250,000 F

16

. Actual ResultsStatic BudgetStatic-budget VarianceUnits sold495,000500,000Revenues$4,950,000$5,000,000$(50,000) UVariable costs1,250,0001,500,000(250,000) FContribution margin$3,700,000$3,500,000$200,000 FFixed costs925,000900,00025,000 UOperating income$2,775,000$2,600,000$175,000 F

17

. 10,000 units20,000 unitsMaterials ($0.60)$ 6,000$12,000Machinery 9,000 9,000$15,000$21,000

18

. 10,000 units20,000 unitsMaterials ($1.50)$15,000$30,000Machinery 23,00023,000$38,000$53,000 19 . Answer (D) is correct. If the design phase is 60% complete, the costs that should have been incurred equal $1,800,000 (60% x $3,000,000). Consequently, the overrun is $700,000 (2,500,000 - $1,800,000). Answer (A) is incorrect because the design phase has incurred an overrun. Answer (B) is incorrect because $500,000 is the excess of budgeted cost over actual cost incurred to date. Answer (C) is incorrect because the design phase has incurred an overrun. 20

. Answer (C) is correct. The company planned to produce 100,000 units at $6 each ($4 variable + $2 fixed cost), or a total of $600,000, consisting of $400,000 of variable costs and $200,000 of fixed costs. Total production was only 80,000 units at a total cost of $515,000. The flexible budget for a production level of 80,000 units includes variable costs of $320,000 ($4 x 80,000 units). Fixed costs would remain at $200,000. Thus, the total flexible budget costs are $520,000. Given that actual costs were only $515,000, the variance is $5,000 favorable. Answer (A) is incorrect because $85,000 favorable is based on a production level of 100,000 units. Answer (B) is incorrect because the variance is favorable. Answer (D) is incorrect because the variance is favorable.

21

. REQUIRED: The flexible-budget operating income. DISCUSSION: (D) A flexible budget is formulated for several different activity levels. Assuming that unit sales price ($100,000 ÷ 10,000 units = $10), variable costs of sales ($60,000 ÷ 10,000 units = $6), and total fixed costs ($30,000) do not change, a flexible budget may be prepared for the actual sales level (12,000 units). Hence, the budgeted contribution margin (sales – variable cost of sales) equals $48,000 [(12,000 units x $10) – (12,000 units x $6)]. The operating income is therefore $18,000 ($48,000 CM - $30,000 FC). Answer (A) is incorrect because $12,000 assumes that all costs are variable. Answer (B) is incorrect because $19,200 is based on actual variable costs. Answer (C) is incorrect because $30,000 is based on actual sales revenue.

22

. REQUIRED: The true statement about the actual results.

DISCUSSION: (C) The sales volume variance is the change in contribution margin caused by the difference between the actual and budgeted unit volume. It equals the budgeted unit contribution margin times the difference between actual and expected volume, or $8,000 [($10 - $6) x (12,000 – 10,000)]. The sales volume variance is favorable because actual sales exceeded budgeted sales. Answer (A) is incorrect because the flexible budget variance for actual results is $11,200 favorable ($29,200 actual operating income - $18,000 flexible budget operating income). Answer (B) is incorrect because the sales price variance is $12,000 [$132,000 actual sales $10 x 12,000 units sold)]. Answer (D) is incorrect because the fixed cost budget variance is $2,000 unfavorable ($32,000 actual - $30,000 budgeted). 23

.

20,000 units ($600,000/25,000) = $480,000

24

.

$450,000, given in the static budget

25

.

$512,000 - (20,000 x $600,000/25,000) = $32,000 U

.

Variable standard cost per unit

26

Direct materials (15 pounds x $16)$240Direct labor (4 hours x $24) 96Variable overhead (4 hours x $14)

56$392

27

. Answer (D) is correct. Each unit of finished product contains 2 yards of direct material. However, the problem states that the 20% direct material spoilage is calculated on the quantity of direct material input. Although, not mentioned, the facts on this question infer that the spoilage is normal and should be part of the product’s standard cost. The solutions approach would be to setup the following formula: Input quantity – Spoilage = Output amount X – .2X = 2 yards .8X = 2 yards x = 2.5 yards Thus, the standard direct material cost per unit of finished product is $7.50 (2.5 yards x $3).

28

. Answer (D) is correct. If 1.5 yards remain in each unit after spoilage of 25% of the direct materials input, the total per unit input must have been 2 yards (1.5 ÷ 75%). The standard unit direct materials cost is therefore $4.00 (2 yards x $2). Answer (A) is incorrect because the 1.5 yards of good output should be divided (not multiplied) by 75% to determine the standard yards of material per unit. Answer (B) is incorrect because $3.00 is the cost per unit excluding spoilage. Answer (C) is incorrect because $3.75 is found by adding 25% of the materials of the finished product as spoilage and then multiplying by the $2.00 cost per yard [(1.5 x 1.25) x $2].

29

. 6,000/1,000 = 6.00 lbs. . Answer (A) is correct. The 3,000 radios require three units each of Part X, a total of 9,000 units. At a standard unit cost of $2.90, the 9,000 units will total $26,100. Answer (B) is incorrect because $27,000 is based on actual unit costs incurred rather than the $2.90 standard cost. Answer (C) is incorrect because $29,000 is based on the actual quantity used rather than the standard quantity. Answer (D) is incorrect because $36,000 is the amount of actual purchases for the month.

30

31

. Answer (C) is correct. The materials purchase price variance equals the quantity purchased multiplied by the difference between the actual price and the standard price, or $135 unfavorable [($.75 - $.72) x 4,500 lbs.]. The variance is unfavorable when the actual price exceeds the standard price. Answer (A) is incorrect because $117 unfavorable is based on the standard input for 1,300 units. Answer (B) is incorrect because $123 unfavorable is based on the actual quantity used. Answer (D) is incorrect because $150 unfavorable is based on the assumption that 5,000 lbs. were purchased.

32

.

33

. Answer (C) is correct. The standard unit cost is $2.90. The actual cost was $3.00 per unit ($36,000 ÷ 12,000 units). Thus, the unfavorable price variance is $1,200 [($3.00 - $2.90) x 12,000 units]. The variance is unfavorable because the actual cost was higher than the standard cost. Answer (A) is incorrect because $900 equals the unit price variance ($.10) times 9,000 units (3 x 3,000) in the radios manufactured. Answer (B) is incorrect because $900 equals the unit price variance ($.10) times 9,000 units (3 x 3,000) in the radios manufactured. Answer (D) is incorrect because the variance is unfavorable. The actual cost was greater than the standard cost.

34

. Answer (D) is correct. The standard cost per part is $1.45. The actual cost was $18,000 for 12,000 parts, or $1.50 each. Thus, the price variance is $600 unfavorable [12,000 parts x ($1.50 - $1.45)]. The variance is unfavorable because the actual cost was higher than the standard cost. Answer (A) is incorrect because $450 unfavorable equals the standard quantity needed for the actual output times the $.05 unfavorable price variance per part. Answer (B) is incorrect because the variance is unfavorable, and $450 is the amount of the variance that relates only to the standard input for the actual output. Answer (C) is incorrect because the variance is unfavorable. Furthermore, the variance is based on the quantity purchased, not the quantity consumed. [Note: The materials price variance is sometimes isolated at the time of transfer to production.]

35

. Answer (C) is correct. The direct materials price variance measures the difference between what was actually paid for the goods purchased and the standard price allowed for the goods purchased. Thus, it equals the difference between actual price and standard price, multiplied by the actual quantity purchased. The direct materials price variance is $5,000 favorable {[$2.50 - ($120,000 ÷ 50,000 units)] x 50,000 units}. Answer (A) is incorrect because $7,500 unfavorable equals the difference between actual and budgeted direct materials, multiplied by the standard price per pound of direct materials. Answer (B) is incorrect because zero equals the difference between the budgeted direct materials purchases at standard cost and the actual cost of the direct materials. Answer (D) is incorrect because $5,100 unfavorable equals the difference between the standard and actual costs of direct materials per pound, multiplied by the actual pounds used instead of the actual pounds purchased.

36

. Answer (D) is correct. The materials price variance measures the difference between what was actually paid for the goods purchased and the standard amount allowed for the goods purchased. Thus, it equals the difference between actual price and standard price, multiplied by the actual quantity purchased. This question assumes that price variances are isolated at the time of purchase. If they are isolated when the materials are used, the variance is the difference between standard and actual price, times the amount used (not amount purchased). Accordingly, the direct materials purchase price variance is $1,250 F {[($38,750 TC ÷ 25,000 lbs.) - $1.60 per lb.] x 25,000 lbs.}. The variance is favorable because actual price was less than standard price. Answer (A) is incorrect because $1,125 favorable results from multiplying the standard direct materials that should have been used in production [(3 x 7,500) = 22,500 lbs.] times the difference between standard price and actual price [($1.60 - $1.55) = $.05]. Answer (B) is incorrect because $1,150 favorable results from multiplying the direct materials issued to production (23,000 lbs.) times the difference between standard price and actual price [($1.60 - $1.55) = $.05]. Answer (C) is incorrect because $1,200 favorable results from multiplying the direct materials that should have been used for budgeted production [(3 x 8,000) = 24,000 lbs.] times the difference between standard price and actual price [($1.60 $1.55) = $.05].

$50,400 – (17,000 x $3) = $600 (F)

37

.

38

. REQUIREMENT: To determine Lem’s material price variance for May. Answer (B) is correct. The direct materials price variance is the difference between actual unit prices and standard unit prices multiplied by the actual quantity, as shown below. AQ x AP – AQ x SP = Materials price variance $10,080 – (4,200m x $2.50.) = $420F The $420 price variance is favorable because the actual purchase price of the material was lower than the standard price. Since the material was purchased for only $2,40 per meter ($10,080 cost 4,200m), Lem saved $0.10 per meter compared to the standard price, for a total price savings of $420 (4,200m x $0.10/m). Note that the standard quantity of materials is ignored in order to isolate these price differences; differences in quantity are addressed by the materials usage variance.

39

. Answer (C) is correct. The direct materials price variance is found by multiplying the difference between the actual price (AP) of direct materials and the standard price (SP) per unit by the actual quantity (AQ). AQ(AP - SP) = MPV 28,000($2.00 - $2.20) = $5,600 favorable Answer (A) is incorrect because the direct materials price variance is found by multiplying the actual quantity (28,000) times the difference between the AP ($2.00) and the SP ($2.20). Answer (B) is incorrect because the direct materials price variance is found by multiplying the actual quantity (28,000) times the difference between the AP ($2.00) and the SP ($2.20). Answer (D) is incorrect because $2,200 unfavorable is the usage variance.

$170,000 – (10,000 x $16) = $10,000 unfavorable

40

$240= 1,600 (x - $3.60)1,600 x= $240 + $5,760x= $3.75 41 . (6,000 x $16) - $6,000 = $90,000 $90,000/6,000 pounds = $15 42

. 80,000 x 2 x $5 = $800,000 $800,000 - $40,000 = $760,000 $760,000/$5 = 152,000 pounds

43

. 20,000 x $4 x $6 = $480,000 $480,000 + $30,000 = $510,000 $510,000/$6 = 85,000

44

. Answer (D) is correct. The company produced 12,000 units of output, each of which required two units of raw materials. Thus, the standard input allowed for raw materials was 24,000 units at a standard cost of $2.50 each. An unfavorable quantity variance signifies that the actual quantity used was greater than the standard input allowed. The materials quantity variance equals the difference between actual and standard quantities, times the standard price per unit. Consequently, since 1,000 ($2,500U ÷ $2.50) additional units were used, the actual total quantity must have been 25,000 units (24,000 standard + 1,000). Answer (A) is incorrect because 12,000 units is the number of units of finished product. Answer (B) is incorrect because 12,500 units assumes that each unit of finished product includes only one unit of raw materials. Answer (C) is incorrect because 23,000 units assumes a favorable quantity variance.

45

. Answer (B) is correct. Given that the company produced 12,000 units with a total standard cost for materials of $60,000, the standard cost must be $5.00 ($60,000 ÷ 12,000 units) per unit of finished product. Because each unit of finished product requires two units of raw materials, the standard unit cost for raw materials must be $2.50. Answer (A) is incorrect because the unit standard cost is $2.50. Answer (C) is incorrect because $3 is the actual cost per unit of raw materials. Answer (D) is incorrect because $5

is the total standard cost of raw materials for each unit of finished product. 46

. x = $5.10 [7,800 - (2,000 x 4)] x = ($1,020) favorable

47

. Answer (A) is correct. At the given production level, 9,000 components (3,000 x 3) are needed. However, 10,000 were used. Consequently, the materials efficiency (quantity or usage) variance was $2,900 unfavorable [(10,000 - 9,000) x $2.90 standard cost per component]. Answer (B) is incorrect because the variance was unfavorable. The actual quantity used was greater than the quantity budgeted. Answer (C) is incorrect because the quantity variance is based on the quantity used during the period (10,000), not the quantity purchased (12,000). Answer (D) is incorrect because the quantity variance is based on the quantity used during the period (10,000), not the quantity purchased (12,000).

48

.

[10,400 – (2,000 x 5)] x $3 = $1,200 (U)

49

.

(5,900 – 6,000) x $12 = $1,200 (F)

50

. Answer (A) is correct. Standard usage was three parts per radio at $1.45 each. For a production level of 3,000 units, the total materials needed equaled 9,000 parts, but materials actually used totaled 10,000 parts. Thus, the variance is $1,450 unfavorable [$1.45 standard cost per part x (10,000 used - 9,000 standard usage)]. Answer (B) is incorrect because the variance is unfavorable. The actual quantity used exceeded the standard input allowed. Answer (C) is incorrect because $4,350 unfavorable assumes that 12,000 parts were consumed. Answer (D) is incorrect because $4,350 favorable assumes that 12,000 parts were consumed and that the variance is favorable.

51

. Answer (A) is correct. The direct materials efficiency variance measures the difference between the actual use of inputs and the budgeted quantity of inputs allowed for the activity level achieved. The direct materials efficiency variance equals the standard unit price times the difference between inputs actually used and standard inputs. The direct materials efficiency variance is $500 favorable {[(32,000 x 1.60) - 51,000] x $2.50}. Answer (B) is incorrect because $3,000 favorable uses the amount of direct materials purchased instead of the actual amount used. Answer (C) is incorrect because $7,500 unfavorable equals the difference between the standard amount allowed for the budgeted units to be produced and the amount of direct materials used, multiplied by the standard price per pound. Answer (D) is incorrect because $8,000 unfavorable equals the difference between the budgeted finished units and the actual finished units, multiplied by the standard cost of a finished unit.

52

. Answer (B) is correct. The efficiency (quantity or usage) variance for direct materials equals standard unit price times the difference between actual usage and the standard usage for the actual output. Accordingly, the direct materials efficiency variance is $800 U {[23,000 lbs. issued - (3 lbs. x 7,500 units)] x $1.60}. The variance is unfavorable because actual usage exceeded standard usage. Answer (A) is incorrect because $775 unfavorable results from multiplying the difference between standard quantity [(3 x 7,500) = 22,500] and actual quantity used (23,000) times the actual price ($1.55). Answer (C) is incorrect because $1,600 results from multiplying the difference between standard quantity that should have been used for budgeted production [(3 x 8,000) = 24,000] and actual quantity used (23,000) times the standard price ($1.60). Answer (D) is incorrect because $3,200 favorable results from multiplying the difference between the actual quantity purchased (25,000) and actual quantity used (23,000) times the standard price ($1.60).

53

. Answer (C) is correct. The price variance equals actual quantity times the difference between the actual and standard prices. Actual usage and the standard price were 25,000 units and $2.50, respectively. Actual price was $3.00 ($105,000 total cost ÷ 35,000 units purchased). Consequently, the materials price variance is $12,500 unfavorable [($3.00 $2.50) x 25,000 units]. Answer (A) is incorrect because $2,500 unfavorable is the materials quantity variance. Answer (B) is incorrect because the price variance is $12,500, or $.50 per unit. Answer (D) is incorrect because the price variance is $12,500, or $.50 per unit.

54

$3,000= x (30,000 - 29,000)1,000 x= $3,000X= $3Y= $2.80 - $3.00(30,000)Y= ($6,000) favorable 55 . Answer (D) is correct. Dividing the actual cost of $60,025 by the 4,900 units used results in an average cost of $12.25 per unit. Answer (A) is incorrect because $12 is the standard cost. Answer (B) is incorrect because $12.01 is based on the budgeted usage. Answer (C) is incorrect because $12.24 equals the $60,000 standard cost for 5,000 units divided by 4,900 units. 56

. Answer (C) is correct. The price variance equals the actual quantity times the difference between the actual price and the standard price. The actual price is $12.25, and the standard price is $12 (given). Thus, the price variance is $1,225 unfavorable [4,900 units x ($12.25 actual - $12.00 standard)]. Answer (A) is incorrect because a price variance exists. The actual price paid was greater than the standard allowed. Answer (B) is incorrect because the variance is unfavorable. Answer (D) is incorrect because the variance is unfavorable.

57

.

$20,000 + 1,000 U - 1,200 F = $19,800

58

.

$30,000 – 500 F + 800 U = $30,300

59

. Answer (C) is correct. The direct materials purchase price variance is the difference between the standard price per pound ($4.00) and actual price per pound ($297,000 ÷ 75,000 = $3.96) times the pounds of direct materials purchased for the month. Hence, the price variance is $3,000 F [($4.00 - $3.96) x 75,000 pounds]. The quantity variance is the difference between actual usage of direct materials (70,000 pounds) and standard usage of direct materials for actual output (23,000 actual units produced x 3 pounds = 69,000 pounds) valued at the standard price per pound ($4.00). The quantity variance is therefore $4,000 U [(70,000 - 69,000) x $4]. Answer (A) is incorrect because the price variance is $3,000 F and the quantity variance is $4,000 U. Answer (B) is incorrect because the quantity variance is $4,000 U. Answer (D) is incorrect because the price variance is $3,000 F.

60

. Answer (B) is correct. The materials mix variance equals the actual total quantity used times the difference between the budgeted weighted-average standard unit cost for the budgeted mix and the budgeted weighted-average standard unit cost for the actual mix. This variance is favorable if the standard weighted-average cost for the actual mix is less than the standard weighted-average cost for the budgeted mix. The standard mix weightedaverage standard unit cost is $.225 per liter ($135 standard total cost ÷ 600 liters). The standard cost of the actual quantity used was $18,606 (see below). Thus, the actual mix weighted-average standard unit cost was $.220398 ($18,606 ÷ 84,420 liters used), and the mix variance was $388.50 favorable [($.220398 - $.225) x 84,420 liters]. $.200 x 26,600 = $ 5,320.00 .425 x 12,880 = 5,474.00 .150 x 37,800 = 5,670.00 .300 x 7,140 = 2,142.00$18,606.00Answer (A) is incorrect because $294 favorable is the materials quantity variance. Answer (C) is incorrect because $94.50 unfavorable is the materials yield variance. Answer (D) is incorrect because $219.50 favorable is based on the actual mix of purchases.

61

. Answer (C) is correct. The materials yield variance equals the difference between the actual input and the standard input allowed for the actual output, times the budgeted weighted-average standard cost per input unit at the standard mix. The standard input for the actual output was 84,000 liters (140 batches x 600 liters per batch). The standard mix budgeted weighted-average standard unit cost is $.225 per liter ($135 total cost ÷ 600 liters). Thus, the yield variance is $94.50 unfavorable [(84,420 liters used - 84,000 liters allowed) x $.225]. Answer (A) is incorrect because $294.50 favorable is the materials quantity variance. Answer (B) is incorrect because $388.50 favorable is the materials mix variance. Answer (D) is incorrect because $219.50 favorable is based on the actual mix of purchases.

62

.

Materials Mix Variance MaterialAQSMAQ - SMSP(AQ – SM)SPA30,00035,000(5,000)$1.00$(5,000)B20,00015,0005,000 3.0015,000$10,000 (U)

63

.

(40,000 - 36,000) x ($8,000/4,000) = $8,000 (U)

64

.

MUV = mix variance + yield variance = $10,000 (U) + $8,000 (U) = $18,000 (U)

65

. REQUIRED: The standard direct labor cost per unit DISCUSSION: (A) The hourly wage worker is $12.50 ($500  40 hrs). The direct labor cost per hour is $15 [($12.50 x 1.0) + benefits equal to 20% of wages]. Consequently, the standard direct labor cost per unit is $30 ($15 x 2 hrs.). Answer (B) is incorrect because the weekly wages and benefits per worker ($500 x 1.2) should be divided by 40 hours per week, not be 50 workers. Answer (C) is incorrect because $15.00 is the DL cost per hour. Two DL hours are required per unit. Answer (D) is incorrect because the weekly wages ad benefits per worker ($500 x 1.2) should be divided by 40 hours per week, not by 50 workers. Furthermore, 2 DL hours are required per unit.

66

. Answer (A) is correct. The hourly wage per worker is $15.00 ($600 ÷ 40 hours). The direct labor cost per hour is $18.00 [$15.00 x (1.0 + benefits equal to 20% of wages)]. Consequently, the standard direct labor cost per unit is $54 ($18 x 3 hours). Answer (B) is incorrect because the weekly wages and benefits per worker ($600 x 1.2) should be divided by 40 hours per week, not by 60 workers to determine the direct labor cost per hour. Answer (C) is incorrect because $30 results from omitting the employee benefits (20% of wages) from the calculation. Answer (D) is incorrect because $18.00 is the DL cost per hour.

67

. Answer (B) is correct. The standard direct labor unit cost equals 3 hours times the cost per DLH. This amount is determined by adding employee benefits to weekly wages and dividing by hours per week. Weekly wages $245.00Plus benefits (.25 x $245) 61.25$306.25Divided by hours/week÷ 35Cost/DLH $ 8.75DLH/unit x3Unit DL cost $ 26.25Answer (A) is incorrect because $21.00 excludes employee benefits. Answer (C) is incorrect because the standard direct labor unit cost equals 3 hours times the cost per DLH. The cost per DLH equals weekly wages plus employee benefits, divided by productive hours per week, or $8.75 [($245.00 + 61.25) ÷ 35]. The standard direct labor cost per unit is $26.25 ($8.75 x 3 hours). Answer (D) is incorrect because $36.75 results from dividing weekly wages plus benefits by 25 employees instead of 35 weekly productive hours per employee.

68

. Answer (B) is correct. The total flexible budget direct labor variance equals the difference between cost at actual hours and actual wages and the cost at standard hours and standard wages, or $1,900 U ($48,500 - $46,600). Answer (A) is incorrect because $100 F ($48,500 - $48,600) is the direct labor price (rate) variance. Answer (C) is incorrect because the flexible budget direct labor variance is

unfavorable, not favorable. Total actual cost exceeds the total flexible budget amount. Answer (D) is incorrect because $2,000 U ($48,600 - $46,600) is the direct labor efficiency (usage) variance. 69

. $12,000/($10 - $9) = 12,000 actual hours (12,000 x $9) – (10,000 x $10) = $8,000 (U)

70

. Answer (B) is correct. The total direct labor variance can be isolated into the price variance and the efficiency variance. The labor price variance equals the actual price minus the standard price, times the actual quantity. Actual price is $8.70 ($27,840 ÷ 3,200 hours). Hence, the variance is $2,240 U [($8.70 - $8.00) x 3,200]. Answer (A) is incorrect because the variance is unfavorable. Answer (C) is incorrect because $3,840 equals actual direct labor cost ($27,840) minus the standard direct labor cost of the budgeted production (1,200 x 2.5 hours x $8). Answer (D) is incorrect because $5,600 unfavorable is the direct labor efficiency variance.

71

. Answer (D) is correct. The direct labor rate variance equals actual DLH times the difference between the actual and standard direct labor rates, or $250 unfavorable {6,250 actual DLH x [($75,250 actual costs ÷ 6,250 actual DLH) - $12.00 standard rate]}. Answer (A) is incorrect because $10 unfavorable equals the difference between the planned and actual DLH times the difference between the standard and actual rates. Answer (B) is incorrect because $240 unfavorable equals the planned DLH times the difference between the standard and actual rates. Answer (C) is incorrect because $248 unfavorable equals the DLH allowed for the actual output times the difference between the standard and actual rates.

72

. Answer (D) is correct. The standard cost of materials for 8,500 units is $127,500 (8,500 x $15). Thus, no variance arose with respect to materials. Because labor for 9,000 units was budgeted at $81,000, the unit labor cost is $9. Thus, the labor budget for 8,500 units is $76,500, and the total labor variance is $1,275 ($77,775 - $76,500). Because the actual cost is greater than the budgeted amounts, the $1,275 variance is unfavorable. Given that the actual time per unit (45 minutes) was the same as that budgeted, no labor efficiency variance was incurred. Hence, the entire $1,275 unfavorable variance must be attributable to the labor rate (or price) variance. Answer (A) is incorrect because there is no materials variance; the actual cost was equal to the budgeted cost for materials. Answer (B) is incorrect because no labor efficiency variance occurred. Budgeted hours were identical to actual hours for 8,500 units. Answer (C) is incorrect because no labor efficiency variance occurred. Budgeted hours were identical to actual hours for 8,500 units.

73

. $12,000/($10 – $9) = 12,000 hours . 14,000 x $40 = $560,000 $560,000 - $70,000 = $490,000 $490,000/14,000 = $35

74

75

. 20,000 x $5 = $100,000 $100,000 + $4,000 = $104,000 $104,000/20,000 = $5.20

76

. REQUIRED: The direct labor payroll for March. DISCUSSION: (A) When the actual direct labor rate is unknown, the total direct labor payroll is found by multiplying the actual hours by the standard rate, then subtracting the favorable labor variance. (40,000 x $6.30) – ($8,400) = $243,600 Answer (B) is incorrect because $252,000 equals actual hours times the standard rate. Answer (C) is incorrect because $264,600 equals standard hours times the standard rate.

Answer (D) is incorrect because the favorable rate variance should be subtracted from the payroll calculated at the standard rate for the actual hours. 77

. Answer (A) is correct. When the actual direct labor rate is unknown, the total direct labor payroll can be found by multiplying the actual hours by the standard rate, then subtracting the favorable labor variance. (32,000 x $5.04) - $6,720 = $154,560 Answer (B) is incorrect because the total $6,720 DL rate variance, not the DL rate variance per standard hour times the actual DL hours, should be subtracted in the calculation. Answer (C) is incorrect because the total $6,720 DL rate variance, not the DL rate variance per standard hour times the actual DL hours, should be used in calculating the payroll. Furthermore, a favorable DL rate variance should be subtracted from, not added to, the standard DL costs allowed for hours worked. Answer (D) is incorrect because the $6,720 DL rate variance is favorable, and should therefore be subtracted from, not added to, the standard payroll for the hours worked.

78

. REQUIRED: The standard direct labor rate for the month. DISCUSSION: (D) The labor rate variance equals actual hours times the difference between the actual and standard rates. The variance is unfavorable, so the actual rate must exceed the standard rate. 10,000 (SR - P7.50) = – P5,000 SR = P7.50 – (P5,000  10,000) SR = P7.00 Answer (A) is incorrect because $6.95 treats the $0.55 variance per unit as unfavorable. Answer (B) is incorrect because actual hours, not standard hours, are used to determined the SR. Furthermore, the favorable variance should be added, not subtracted, in calculating the standard rate. Answer (C) is incorrect because actual hours, not standard hours, should be used in determining the standard rate.

79

. REQUIRED: The standard direct labor rate for the month. DISCUSSION: (D) The labor rate variance equals actual hours times the difference between the actual and standard rates. The variance is favorable, so the standard rate must exceed the actual rate. 10,000 (SR - $7.50) = $5,500 SR = $7.50 + ($5,500  10,000) SR = $8.05 Answer (A) is incorrect because $6.95 treats the $0.55 variance per unit as unfavorable. Answer (B) is incorrect because actual hours, not standard hours, are used to determined the SR. Furthermore, the favorable variance should be added, not subtracted, in calculating the standard rate. Answer (C) is incorrect because actual hours, not standard hours, should be used in determining the standard rate.

80

. Answer (D) is correct. The direct labor rate variance equals actual hours times the difference between the actual and standard rates. When the variance is favorable, the standard rate exceeds the actual rate and the following equation is used: AH(SR - AR) = favorable rate variance 10,000(SR - $8.25) = $5,600 F SR - $8.25 = $.56 SR = $8.81 Answer (A) is incorrect because $7.69 results from treating the $.56 variance per unit as unfavorable and subtracting it from the AR of $8.25. Answer (B) is incorrect because actual hours, not standard hours, are used to determine the SR. Furthermore, the favorable variance should be added, not subtracted, in calculating the standard rate. Answer (C) is incorrect because $8.25 is the actual rate.

81

. x = $10 [2,000 - (900 x 2)] x = $2,000 unfavorable

82

. Answer (B) is correct. The direct labor efficiency (quantity) variance equals standard price times the difference between actual and standard amounts of labor hours. The standard price is $10 per hour. The actual amount of labor hours is 3,200 hours. The standard amount of labor hours is 3,000 (2 hours x 1,500 units). Thus, the direct labor efficiency variance is $2,000 [$10 x (3,200 - 3,000)]. The variance is unfavorable because more labor hours were used than the standard. Answer (A) is incorrect because $2,050 uses the actual labor price. Answer (C) is incorrect because $1,250 is the difference between the direct labor efficiency variance and the product of the cost difference ($.25) and the standard hours allowed. Answer (D) is incorrect because $1,200 is the difference between the labor efficiency and rate variances.

83

. 53. REQUIRED: The amount of an unfavorable direct labor efficiency variance. DISCUSSION: (B) The direct labor efficiency (quantity) variance equals standard amounts of labor hours. Thus, the direct labor efficiency variance is $1,200 {$12 standard rate x [4,100 actual hours – (4 standard hours x 1,000 units)]}. The variance is unfavorable because more labor hours were used than the standard. Answer (A) is incorrect because $1,220 uses the actual labor rate. Answer (C) is incorrect because $820 is the labor rate variance. Answer (D) is incorrect because $00 is the difference between the direct labor efficiency variance and the cost difference ($0.20) times the standard hours.

84

. Answer (C) is correct. The direct labor efficiency variance equals actual quantity minus standard quantity, times the standard price. The standard quantity is the amount of standard labor hours required for the actual good output achieved. Actual labor hours equaled 3,200, standard hours were 2,500 (1,000 units of output x 2.5 hours), and the standard direct labor price was $8. Hence, the labor efficiency variance was $5,600 U [(3,200 actual hours - 2,500 standard hours) x $8]. Answer (A) is incorrect because $2,240 unfavorable is the direct labor rate variance. Answer (B) is incorrect because the variance is unfavorable. Answer (D) is incorrect because $6,090 equals the difference between actual hours and standard hours for the actual output (3,200 2,500 = 700), times the actual direct labor cost per hour ($8.70).

85

. Answer (A) is correct. The direct labor efficiency variance equals the standard direct labor rate times the difference between the actual DLH and the standard DLH allowed for the actual output, or $600 unfavorable {$12 x [6,250 actual DLH - (.4 DLH x 15,500 pounds actually produced)]}. Answer (B) is incorrect because $602 unfavorable is based on the actual direct labor rate. Answer (C) is incorrect because $2,400 unfavorable equals the standard direct labor rate times the difference between the DLH allowed for the planned output and the DLH allowed for the actual output. Answer (D) is incorrect because $3,000 unfavorable equals the standard direct labor rate times the difference between the DLH allowed for the planned output and the actual DLH.

86

. Answer (D) is correct. The direct labor efficiency (quantity) variance equals standard price times the difference between actual and standard amounts of labor hours. The standard amount for the actual output is 6,500 direct labor hours (1.25 DLH x 5,200 units). The variance is $1,200 U [(6,500 standard hours - 6,600 actual hours) x $12]. Answer (A) is incorrect because $4,200 equals $12 times the difference between actual hours (6,600) and the hours budgeted for planned output (5,000 x 1.25 = 6,250). Answer (B) is incorrect because $3,000 equals $12 times 6,500 standard hours for the actual output minus 6,250 standard hours for the budgeted output. Answer (C) is incorrect because $2,220 equals actual cost minus budgeted cost.

87

. Answer (A) is correct. The labor efficiency variance is $980 ($9,800 - $8,820). It is the difference between actual and standard hours multiplied by the standard labor rate.

Answer (B) is incorrect because the labor rate variance is $200. It is the difference between the actual and standard rates time the actual hours. Answer (C) is incorrect because the volume variance is the difference between budgeted fixed overhead and the amount applied based on the standard input allowed for the actual output. Answer (D) is incorrect because the term "spending variance" is usually applied to overhead variances. 88

. REQUIRED: The actual hours worked. DISCUSSION: (D) The standard hours allowed equaled 2,000, and the labor efficiency variance was $1,600 unfavorable; i.e., actual hours exceeded standard hours. The labor efficiency variance equals the standard rate ($8 per hour) times the excess hours. Given that the variance is $1,600, 200 excess hours ($1,600  $8) must have been worked. Thus, 2,200 actual hours (2,000 standard + 200 excess) were worked. Answer (A) is incorrect because the 200-hour difference between AH and SH should be added to, not subtracted from, the standard hours allowed. Answer (B) is incorrect because the difference between AH and SH must be determined using the standard rate per hour. The efficiency variance was also incorrectly treated as favorable and subtracted from the SH. Answer (C) is incorrect because the difference between AH and SH must be determined using the standard rate per hour.

89

. Answer (D) is correct. The standard hours allowed equaled 3,000, and the labor efficiency variance was $1,870 unfavorable; that is, actual hours exceeded standard hours. The labor efficiency variance equals the standard rate ($8.50) times the excess hours. Given that the variance is $1,870, 220 excess hours ($1,870 ÷ $8.50) must have been worked. Thus, 3,220 actual hours (3,000 standard + 220 excess) were worked. Answer (A) is incorrect because the 220 hour difference between AH and SH should not be subtracted from the standard hours allowed. Answer (B) is incorrect because the excess hours should be determined using the standard, not the actual, rate per hour, and the result should be added to, not incorrectly subtracted from, standard hours allowed. Answer (C) is incorrect because excess hours should be determined using the standard, not the actual, rate per hour.

90

$4,200= $3.75 (x - 10,000)$3.75 x= $4,200 + $37,500X= 11,120 91 . Answer (B) is correct. The direct labor rate variance is determined by multiplying the difference between the actual and standard rates by the actual hours. The standard rate equals the direct labor efficiency variance divided by the difference between the actual and standard hours. The actual rate equals the total direct labor payroll divided by the actual hours. $3,840 ÷ (41,200 - 42,000) = $4.80 SR $247,200 ÷ 41,200 = 6.00 AR $1.20 diff. x41,200 AH DL rate variance = $49,440 UAnswer (A) is incorrect because $44,496 was determined using an actual rate of $5.88. Answer (C) is incorrect because the variance is unfavorable. Answer (D) is incorrect because the $50,400 results from multiplying $1.20 by standard hours (42,000). 92

.

107. Answer (A) is correct. The labor yield variance is the portion of the labor efficiency variance attributable to the difference between actual hours and the standard hours allowed. Total hours worked were 1,575 (550 + 650 + 375), and standard hours allowed equaled 1,500 (500 + 500 + 500). The 75-hour difference is multiplied by the weightedaverage standard labor rate, which equals $6.67 {[(500 x $8) + (500 x $7) + (500 x $5)] ÷ 1,500 standard DLH}. Thus, the variance is $500 unfavorable ($6.67 x 75). Answer (B) is incorrect because the labor yield variance is $500. Answer (C) is incorrect because the difference between the 1,575 AH (550 + 650 + 375) and the 1,500 SH (500 + 500 + 500) must be multiplied by the $6.67 weighted-average SR {[(500 x $8) + (500 x $7) + (500 x $5)] ÷ 1,500 standard DLH}. Answer (D) is incorrect because $1,500 is three times the actual labor yield variance of $500.

93

. Answer (A) is correct. The labor mix variance is the sum of the products of the difference between actual and standard hours for each class of labor times the difference between the budgeted standard rate for that class of labor and the weighted-average standard labor rate. ClassStandard HoursActual Hours VarianceBud. Std.-W.A. Std. ProductIII500550- 50+$1.33$ 66.67 UII 500650- 150+ .33 50.00 UI 500375+ 1251.67 208.33 U$325.00 UAnswer (B) is incorrect because $66.67 is the labor variance for labor Class III only. Answer (C) is incorrect because the labor mix variance is the sum of the products of the difference between actual and standard hours for each class of labor times the difference between the average standard labor rate for that class of labor. Answer (D) is incorrect because $50.00 is the labor variance for labor Class II only.

94

. Answer (A) is correct. The labor yield variance is the difference between actual and budgeted inputs, times the budgeted weighted-average rate for the planned mix. Total hours worked were 1,575 (550 + 650 + 375), standard hours allowed equaled 1,500 (500 + 500 + 500), and the budgeted weighted-average rate for the planned mix was $6.67 {[(500 x $8) + (500 x $7) + (500 x $5)] ÷ 1,500 standard DLH}. Thus, the variance is $500 unfavorable ($6.67 x 75). Answer (B) is incorrect because $320 is the labor mix variance. Answer (C) is incorrect because $820 is the labor efficiency variance. Answer (D) is incorrect because $515 is based on the budgeted weighted-average rate for the actual mix.

95

. Answer (B) is correct. The labor mix variance is the difference between the budgeted weighted-average rates for the actual and planned mixes, times the actual labor inputs. The budgeted weighted-average rate for the planned mix is $6.67 (see preceding question). The budgeted weighted-average rate for the actual mix is $6.873 [(550 x $8) + (650 x $7) + (375 x $5) ÷ 1,575 actual DLH]. Thus, the mix variance is $320 [($6.873 - 6.67) x 1,575]. Answer (A) is incorrect because $50.00 is the variance for labor class II only [($7 - $6.67) x (650 DLH - 500 DLH)]. Answer (C) is incorrect because $66.67 is the variance for labor class III only [($8 - $6.67) x (550 DLH - 500 DLH)]. Answer (D) is incorrect because $500 is the labor yield variance.

96

. Answer (C) is correct. Labor mix and labor yield variances are the components of the total labor efficiency variance. For example, if the labor yield variance was $500 U and the labor mix variance was $320 U, the total labor efficiency variance would be $820 U. Answer (A) is incorrect because the total labor variance equals the labor efficiency and the labor rate variances. Answer (B) is incorrect because the labor rate variance is the variance of price of the labor. Answer (D) is incorrect because the efficiency variance is not labor variances.

97

.

Labor Mix Variance

Labor typeAQSMAQ - SMSP(AQ – SM)SPMixing4,5005,000(500)$10.00$(5,000)Finishing3,0002,500500 2,500 $2,500 (F)

5.00

98

.

99

.

100

. Answer (D) is correct. The total flexible budget variance is the difference between the standard cost of labor and the actual cost of labor. Based on the standard hours and rates given, the standard cost of labor is $159,060 [(7,920 x $12.00) + (4,620 x $8.00) + (4,510 x $6.00)]. The actual cost of labor is $160,805 ($100,245 + $35,260 + $25,300). Thus, the total flexible budget variance is $1,745 unfavorable ($160,805 actual - $159,060 standard).

(40,000 - 36,000) x ($6,250/4,000) = $6,250 (U) LEV = mix variance + yield variance = $2,500 (F) + $6,250 (U) = $3,750 (U)

Answer (A) is incorrect because $2,205 is the difference between the actual cost and the sum of the products of actual hours and standard rates. Moreover, the variance is unfavorable. Answer (B) is incorrect because $2,205 unfavorable is the labor rate variance. Answer (C) is incorrect because the variance is unfavorable. 101

. Answer (C) is correct. Actual hours x standard rates (8,150 x 12) + (4,300 x 8) + (4,400 x 6) 158,600Actual hours x weighted average standard rates (16,850 x 9.329) 157,194Mix Variance1,406Answer (A) is incorrect because $2,205 results from calculating the budgeted weighted-average standard rate for the actual mix using actual rates. Answer (B) is incorrect because $2,205 results from calculating the budgeted weighted-average standard rate for the actual mix using actual rates. Moreover, the variance is unfavorable. Answer (D) is incorrect because the variance was unfavorable. 102

. Answer (B) is correct. The labor yield variance is the difference between actual and budgeted inputs, multiplied by the budgeted weighted-average standard rate for the standard mix. Total actual hours worked were 16,850 (8,150 + 4,300 + 4,400), and standard hours allowed equaled 17,050 (7,920 + 4,620 + 4,510). The budgeted weighted-average standard rate for the standard mix was $9.33 {[(7,920 x $12) + (4,620 x $8) + (4,510 x $6)] ÷ 17,050}. Hence, the yield variance is $1,866 favorable [$9.33 x (16,850 - 17,050)]. Answer (A) is incorrect because $1,908 favorable results from multiplying by the weightedaverage actual hourly rate for the actual mix instead of by the budgeted weighted-average standard rate for the standard mix. Answer (C) is incorrect because $1,733 favorable results from multiplying by the simple average of the standard hourly rates. Answer (D) is incorrect because $460 favorable results from multiplying each labor class's hour variance by its respective standard hourly rate.

103

.

1,000 units x 24 hours x 30 days = 720,000 units

104

.

800 units x 24 hours x 27 days = 518,400 units

105

. Answer (B) is correct. Standard costs are predetermined target costs which should be attainable under efficient conditions. Currently attainable standards should be achieved under efficient operating conditions. Therefore, engineering estimates based on attainable performance would provide the best basis for Flint in establishing standard hours allowed.

106

.

$161,250/15,000 = $10.75

107

.

$360,000/20,000 = $18.00

108

. Answer (C) is correct. The maintenance cost is a mixed cost containing both fixed and variable elements. To calculate the monthly total fixed costs, divide the annual amount by 12. Monthly fixed maintenance costs: $6,000 ÷ 12 = $500Variable maintenance costs: 30,000 x $0.70/hour =21,000Total maintenance costs = $21,500Answer (A) is incorrect because $20,500 maintenance cost is arrived at by subtracting the $500 fixed costs per month from the $21,000 variable costs. The $500 should be added to the $21,000. Answer (B) is incorrect because $21,000 only includes the variable maintenance costs. Answer (D) is incorrect because $27,000 is determined by adding annual fixed maintenance costs of $6,000 to variable maintenance costs for the month of $21,000. Fixed maintenance costs for the month of $500 should be added instead.

109

. Answer (C) is correct. The formula is for an annual period. Thus, the first step is to divide the $7,200 of fixed costs by 12 months to arrive at monthly fixed costs of $600.

Variable costs will be $.60 per unit, or $12,000 for 20,000 units. The total flexible budget amount is therefore $12,600 ($600 + $12,000). Answer (A) is incorrect because $7,200 is the annual fixed cost. Answer (B) is incorrect because $12,000 is the variable cost. Answer (D) is incorrect because $19,200 is based on fixed costs of $7,200. 110

. Answer (C) is correct. A flexible budget consists of a fixed cost component and a variable cost component. The fixed cost component can be expected to remain constant throughout the budget's relevant range. The variable cost component, however, will change at a constant rate within the budget's range. The increase in budgeted cost of $1,200 ($21,000 $19,800) per 1,000 units of production can therefore be attributed to the variable cost component. The flexible budget for 12,000 units of production will be $23,400 [the cost for 10,000 ($21,000) + $2,400 (2 x $1,200)]. Answer (A) is incorrect because the flexible budget for 12,000 units should be computed by determining the variable cost per unit of $1.20 [($21,000 - $19,800) ÷ 1,000] and the total fixed costs of $9,000 [$21,000 - ($1.20 x 10,000)]. These costs can then be used to determine the total cost of using 12,000 units of electricity [$9,000 FC + (12,000 x $1.20)]. Answer (B) is incorrect because the flexible budget for 12,000 units should be computed by determining the variable cost per unit of $1.20 [($21,000 - $19,800) ÷ 1,000] and the total fixed costs of $9,000 [$21,000 - ($1.20 x 10,000)]. These costs can then be used to determine the total cost of using 12,000 units of electricity [$9,000 FC + (12,000 x $1.20)]. Answer (D) is incorrect because $22,200 is arrived at by subtracting the increase in budgeted cost of $1,200. The flexible budget for 12,000 units of production will be $23,400 [the cost for 10,000 ($21,000) + $2,400 (2 x $1,200).

111

. Answer (D) is correct. The flexible budget formula is Shipping costs = $16,000 + ($.50 x lbs. shipped)Therefore, to determine the flexible budget amount, multiply the actual pounds shipped (12,300) times the standard cost ($.50) to arrive at a total expected variable cost of $6,150. Adding the variable cost to $16,000 of fixed cost produces a budget total of $22,150. Answer (A) is incorrect because $20,680 is based on the variation in the actual number of sales orders from those planned, rather than on pounds shipped. Answer (B) is incorrect because $20,920 is based on the number of shipments, not the number of pounds shipped. Answer (C) is incorrect because $20,800 is based on planned pounds shipped of 9,600, not actual pounds shipped of 12,300.

112

. Answer (D) is correct. According to the flexible budget formula, total fixed costs and unit variable cost are expected to be $18,000 and $.60, respectively. Thus, budgeted variable costs for the actual output should be $7,500 (12,500 lbs. x $.60). Adding the variable costs to the $18,000 of fixed costs produces a budget total of $25,500. Answer (A) is incorrect because $18,000 equals the fixed costs. Answer (B) is incorrect because $18,492 is based on the number of shipments. Answer (C) is incorrect because $23,760 is based on planned pounds shipped of 9,600.

113

. Answer (D) is correct. Given actual overhead of $39,500 and underapplied overhead of $1,500, overhead applied was $38,000 ($39,500 - $1,500). Overhead is applied at the rate of $4 per unit ($40,000 budgeted overhead ÷ 10,000 budgeted units). Accordingly, 9,500 units were produced ($38,000 applied overhead ÷ $4 per unit application rate). Answer (A) is incorrect because 10,250 would have been produced if overhead had been overapplied by $1,500 [($39,500 + $1,500) ÷ $4]. Answer (B) is incorrect because 10,000 is the result of dividing budgeted, not applied, overhead by the application rate. Answer (C) is incorrect because 9,875 units would have been produced if $39,500 had been the amount of applied overhead.

114

. Answer (B) is correct. Two standard hours are allowed for each unit of production. Given actual production of 198,000 units, total standard hours allowed equal 396,000 (2 x

198,000). Answer (A) is incorrect because total standard hours allowed equal 396,000. Answer (C) is incorrect because total standard hours allowed equal 396,000. Answer (D) is inc orrect because total standard hours allowed equal 396,000. 115

. REQUIRED: The applied factory O/H for the month. DISCUSSION: (A) The applied factory O/H equals the standard direct hours allowed for actual production multiplied by the total standard O/H rate per hour. 39,000($4 VOH + $1 FOH) = $195,000 Answer (B) is incorrect because $197,000 includes the $2,000 favorable O/H variance. This variance should not be added to the $195,000 applied factory O/H. Answer (C) is incorrect because the actual DLH worked were used to determine the applied FO when the standard DLH allowed for actual production should have been used. Answer (D) is incorrect because the actual DLH worked were used instead of the standard DLH allowed. furthermore, the $2,000 favorable O/H variance should not be included.

116

. Answer (C) is correct. The applied factory overhead equals the standard input allowed for actual output multiplied by the total standard overhead rate per hour.27,500($5.00 VOH + $1.50 FOH) = $178,750 Answer (A) is incorrect because $137,500 equals standard variable overhead applied. Answer (B) is incorrect because $176,250 results from subtracting the $2,500 overhead variance. Answer (D) is incorrect because $182,000 is based on the actual DLH worked.

117

. Answer (C) is correct. The total overhead variance is the difference between the actual overhead and applied (absorbed) overhead. Given that neither fixed nor variable overhead differed from budgeted amounts, the only variance was caused by under- or overabsorption of fixed overhead. The variable overhead rate does not vary with the capacity. The fixed overhead rate at 90% capacity is

$144,000 fixed overhead = $4.00 36, 000 DLH Given that the actual capacity achieved was 75%, and that 30,000 standard hours were allowed, $120,000 (30,000 x $4.00) of fixed overhead was applied. Thus, $24,000 ($144,000 FOH - $120,000) was underabsorbed. Answer (A) is incorrect because $28,500 assumes a fixed overhead application rate of $5.75. Answer (B) is incorrect because $28,500 assumes a fixed overhead application rate of $5.75. Answer (D) is incorrect because the overhead variance for the year is $24,000 underabsorbed, not overabsorbed. 118

. REQUIRED: The factory O/H variance for the year. DISCUSSION: (D) The total O/H variance is computed by determining the difference between the actual O/H and applied O/h. Given that actual factory O/H was equal to the budgeted amount for the attained capacity, the only variance was caused by under- or overabsorption of fixed O/H. The fixed O/H rate at the 90% activity level is $4 ($108,000 fixed O/H  27,000 DLH). Given that the actual activity level achieved was 80% and that 24,000 standard hours were allowed, $96,000 (24,000 x $4.00) of fixed O/H was absorbed. Hence, underabsorbed (underapplied) fixed O/H was $12,000 ($108,000 - $96,000). Answers (A) and (B) are incorrect because $96,000 of O/H was absorbed. Answer (C) is incorrect because the O/H variance for the year is $12,000 underabsorbed, not overabsorbed.

119

. Answer (A) is correct. To determine Gage’s actual manufacturing overhead from the information given, total actual manufacturing costs must first be computed. Standard manufacturing cost$100,000Excess of actual manufacturing cost over standard costs20,000Total actual costs$120,000Since prime costs consist of direct materials and direct manufacturing labor, these costs are deducted from total actual costs to derive the

120

portion that are overhead costs. Ordinarily, normal spoilage is not added to actual manufacturing overhead. The cost of normal spoilage should be added to the cost of good units produced. Freight out is also excluded because it is a selling expense. Total actual costs$120,000Prime costs(80,000)Actual manufacturing overhead$40,000 . Answer (C) is correct. The total O/H equation is y = $132,000 + $13(DMH). This equation is derived by summing individual O/H items. The fixed portion needs to be converted to a rate by dividing it by normal capacity. Thus, the fixed O/H rate is $1.32 ($132,000 ÷ 100,000). To calculate the total O/H rate, the fixed rate is added to the variable rate. Hence, the total O/H rate per DMH is $14.32 ($1.32 + $13.00). Answer (A) is incorrect because $13.00 per DMH is the variable O/H rate per machine hour. The standard O/H rate also includes the fixed O/H rate. Answer (B) is incorrect because $1.32 per DMH is the fixed O/H rate per machine hour. The standard O/H rate per machine hour includes the variable rate per DMH. Answer (D) is incorrect because $13.76 per DMH is the actual total O/H rate (total actual cost ÷ actual hours).

121

. Answer (D) is correct. In a standard-cost system, O/H is applied using the standard activity allowed for actual production. The standard activity allowed is the standard activity per equivalent unit times the actual production, or 94,000 hours (4 DMH x 23,500). The O/H applied is $1,346,080 (94,000 x $14.32). Answer (A) is incorrect because the standard O/H rate is multiplied by the 94,000 DMH allowed (not 98,700 actual DMH) for the 23,500 equivalent units of production. Answer (B) is incorrect because $1,432,000 is for the original 100,000 DMH budgeted, not the 94,000 DMH budgeted for the production of 23,500 units. Answer (C) is incorrect because $1,358,250 is the total actual O/H.

122

. Answer (A) is correct. The total O/H variance is the over- or underapplied O/H, that is, the difference between applied O/H and the actual O/H. The applied O/H was determined to be $1,346,080. The actual O/H is $1,358,250 ($133,250 + $1,225,000). Consequently, the amount of underapplied O/H is $12,170 U ($1,358,250 - $1,346,080). Answer (B) is incorrect because the applied O/H is $1,346,080, which is based on the budgeted DMH for the equivalent units of production, not on the actual DMH. Answer (C) is incorrect because the applied O/H is $1,346,080, which is based on the budgeted DMH for the equivalent units of production, not on the actual DMH. Furthermore, because the actual O/H is greater than the O/H applied, the underapplied O/H results in an unfavorable variance. Answer (D) is incorrect because $73,750 favorable assumes that standard input for the actual output was 100,000 DMH and that overhead applied was therefore $1,432,000.

123

. Answer (A) is correct. Two-variance analysis considers only budget (controllable) and volume variances. When actual and budgeted fixed overhead are equal, the budget (controllable) variance equals the difference between actual variable overhead and standard hours allowed times the variable overhead rate per hour. Thus, the variance is $3,000 favorable [(49,500 x $6) - $294,000]. A favorable variance results when actual is less than standard. Answer (B) is incorrect because $6,000 results from using actual DLH. Answer (C) is incorrect because $9,000 is the difference between standard and actual DLH, times the variable overhead rate per hour. Answer (D) is incorrect because $9,000 is the difference between standard and actual DLH, times the variable overhead rate per hour.

124

. REQUIRED: The controllable (budget) variance. DISCUSSION: (A) In two-way analysis, the budget (controllable) variance is the total factory O/H variance not attributable to the volume variance. The total factory O/H variance equals the difference between actual total factory O/H and the factory O/H applied based on the standard input allowed for the actual output, or $10,500 unfavorable ([$147,000 actual – ($6.50 x 21,000 DLH) applied]. The volume variance (budgeted fixed factory O/H – amount applied) is $13,500 unfavorable {($108,000 budgeted) – [($108,000  24,000 DLH) x 21,000

DLH]}. Thus, the controllable variance must be $3,000 favorable ($13,500 unfavorable – $10,500 unfavorable). Answer (B) is incorrect because the $13,500 unfavorable is the volume variance. Answer (C) is incorrect because $9,000 favorable equals the difference between total actual factory O/H and factory O/H budgeted at normal capacity. Answer (D) is incorrect because $10,500 unfavorable equals the total factory O/H variance. 125

. Answer (A) is correct. Two-way analysis computes only two overhead variances: the budget (controllable) variance and the volume variance. The product of the variable overhead rate and the standard direct labor hours allowed for capacity attained is the budgeted variable overhead. The budgeted fixed overhead is then added to the budgeted variable overhead, giving the total budgeted overhead for the standard input allowed for actual output. The difference between the actual overhead and budgeted total overhead is the budget (controllable) variance. Actual overhead equals $220,500. Budgeted variable overhead equals $2 per hour ($72,000 ÷ 36,000 DLH). Thus, budgeted variable overhead based on standard hours allowed equals $63,000 ($2 x 31,500 DLH). The total budgeted overhead is $225,000 ($63,000 + $162,000 FOH). The variance is $4,500 favorable ($225,000 - $220,500) because budgeted overhead exceeds actual overhead. Answer (B) is incorrect because $7,500 is based on the DLH worked (33,000). Answer (C) is incorrect because $7,500 is based on the DLH worked (33,000). Answer (D) is incorrect because $13,500 is based on normal capacity of 36,000 DLH.

126

Actual factory overhead$575,000Budget allowance:Variable factory overhead (52,000 x $6)$312,000Budgeted fixed overhead 250,000 562,000Controllable variance$ 13,000unfavorable 127 . $40,000  1,600 = $25 128

129

Actual factory overhead$47,800Budget allowance:Variable ($5 x 2,000)10,000Fixed (80% x $40,000)32,00042,000Spending variance$5,800 . Answer (C) is correct. The total O/H equation is y = $132,000 + $13(DMH). This equation is derived by summing individual O/H items. The fixed portion needs to be converted to a rate by dividing it by normal capacity. Thus, the fixed O/H rate is $1.32 ($132,000 ÷ 100,000). To calculate the total O/H rate, the fixed rate is added to the variable rate. Hence, the total O/H rate per DMH is $14.32 ($1.32 + $13.00). Answer (A) is incorrect because $13.00 per DMH is the variable O/H rate per machine hour. The standard O/H rate also includes the fixed O/H rate. Answer (B) is incorrect because $1.32 per DMH is the fixed O/H rate per machine hour. The standard O/H rate per machine hour includes the variable rate per DMH. Answer (D) is incorrect because $13.76 per DMH is the actual total O/H rate (total actual cost ÷ actual hours).

130

. Answer (D) is correct. In a standard-cost system, O/H is applied using the standard activity allowed for actual production. The standard activity allowed is the standard activity per equivalent unit times the actual production, or 94,000 hours (4 DMH x 23,500). The O/H applied is $1,346,080 (94,000 x $14.32). Answer (A) is incorrect because the standard O/H rate is multiplied by the 94,000 DMH allowed (not 98,700 actual DMH) for the 23,500 equivalent units of production. Answer (B) is incorrect because $1,432,000 is for the original 100,000 DMH budgeted, not the 94,000 DMH budgeted for the production of 23,500 units. Answer (C) is incorrect because $1,358,250 is the total actual O/H.

131

. Answer (A) is correct. The total O/H variance is the over- or underapplied O/H, that is, the difference between applied O/H and the actual O/H. The applied O/H was determined to be $1,346,080. The actual O/H is $1,358,250 ($133,250 + $1,225,000). Consequently, the amount of underapplied O/H is $12,170 U ($1,358,250 - $1,346,080).

Answer (B) is incorrect because the applied O/H is $1,346,080, which is based on the budgeted DMH for the equivalent units of production, not on the actual DMH. Answer (C) is incorrect because the applied O/H is $1,346,080, which is based on the budgeted DMH for the equivalent units of production, not on the actual DMH. Furthermore, because the actual O/H is greater than the O/H applied, the underapplied O/H results in an unfavorable variance. Answer (D) is incorrect because $73,750 favorable assumes that standard input for the actual output was 100,000 DMH and that overhead applied was therefore $1,432,000. 132

. Answer (A) is correct. The spending variance is the difference between the actual total overhead and the sum of budgeted fixed overhead and the variable overhead budgeted for the actual input. The total actual overhead is $140,000 ($106,250 + $33,750). The sum of budgeted fixed overhead and variable overhead budgeted for the actual input is $131,250 ($100,000 + $31,250). Thus, the total spending variance is $8,750 ($140,000 - $131,250). The variance is unfavorable because the actual overhead exceeds the budgeted overhead. Answer (B) is incorrect because $6,250 is the difference between the actual and budgeted variable overhead. Answer (C) is incorrect because $3,750 is the difference between the fixed and variable components of the variance. Answer (D) is incorrect because $2,500 is the difference between the actual and budgeted fixed overhead.

133

. REQUIRED: The spending variance assuming a three-way variance analysis. DISCUSSION: (A) The spending variance is the difference between the actual total factory O/H and the budgeted amount for the actual input. Budgeted $7,000 + (3,500 x $2.50)$15,750 .Actual (15,000) .$ 750 FAnswer (B) is incorrect because the spending variance is favorable. Answer (C) is incorrect because $950 favorable is based on actual fixed factory O/H. Answer (D) is incorrect because $200 unfavorable is the fixed factory O/H spending (budget) variance.

134

. Answer (C) is correct. Three-way analysis of variance combines the fixed overhead budget (spending) and variable overhead spending variances of four-way analysis of variance. It includes spending, efficiency, and volume variances. The spending variance is the difference between the actual overhead incurred and the budgeted overhead for the actual input. Budgeted overhead [$10,500 + (5,250 x $3.80)] $30,450Actual overhead (22,500) $7,950 FAnswer (A) is incorrect because $9,660 is based on standard, not actual, hours. Answer (B) is incorrect because $8,250 results from using actual fixed overhead to calculate budgeted overhead. Answer (D) is incorrect because the spending variance is favorable.

135

. Answer (B) is correct. The solutions approach to compute the variable overhead efficiency variance is to set up a diagram as follows: AH x SR (10,500 x $3)$31,500SH x SR [(2 x 5,000) x $]$30,000Variable overhead efficiency variance (unfavorable)$ 1,500 . Answer (B) is correct. The variable overhead efficiency variance equals the standard variable overhead rate times the difference between the actual input and the standard input allowed for the actual output. The standard rate for variable overhead is $2 per direct labor hour. Actual direct labor hours are 24,500. Standard labor hours are 24,000 (8,000 units x 3 hours per unit). Thus, the variable overhead efficiency variance is $1,000 [2 x (24,500 24,000)]. The variance is unfavorable because actual hours exceeded standard hours. Answer (A) is incorrect because an unfavorable variable overhead efficiency variance exists. Answer (C) is incorrect because $2,000 is the total variable overhead variance (actual overhead minus the overhead rate applied to the standard hours). Answer (D) is incorrect because $3,000 is the difference between actual variable overhead and the product of the standard rate and the actual input (the variable overhead spending variance). This variance is favorable.

136

137

Actual factory overhead$178,500Budget allowance:Variable for actual hours(121,000 x $.50)$ 60,500Fixed 110,000170,500Spending variance$ 8,000unfavorable 138

Budget allowance for actual hours [(121,000 x $.50) + $110,000] $170,500Budget allowance for standard hours:Variable (130,000 x $.50)$ 65,000Fixed 110,000 175,000 Variable efficiency variance$(4,500)favorable 139 . 9,800 mh x $5.25 = $51,450 140

.

141

. Answer (B) is correct. The cost of indirect materials for 144,000 units was expected to be $180,000. Consequently, the unit cost of indirect materials is $1.25 ($180,000 ÷ 144,000). Multiplying the $1.25 unit cost times the 10,800 units produced results in an expected total indirect materials cost of $13,500. Answer (A) is incorrect because the flexible budget amount for indirect materials is $13,500. Answer (C) is incorrect because the flexible budget amount for indirect materials is $13,500. Answer (D) is incorrect because the flexible budget amount for indirect materials is $13,500.

142

.

10,000 mh x $5.00 = $50,000

143

.

[30,000 x (10,800/24,000)] x $11.25 = $151,875

144

.

18,000 x ($360,000/20,000)] = $324,000

145

.

22,000 x ($161,250/15,000)] = $236,500

146

.

$78,000 - $35,000 – ($5 x 9,000) = $2,000 (F)

15,000 mh x $11.00 = $165,000

147

.

Answer (C) is correct. Based on the 440,000 hours actually worked and the $.75 per hour variable overhead rate, the total standard cost for variable overhead is $330,000. The actual variable overhead totaled $352,000. The $22,000 variable overhead spending variance is unfavorable because the actual cost was higher than the standard. Answer (A) is incorrect because the variable overhead spending variance is $22,000U. Answer (B) is incorrect because the variable overhead spending variance is $22,000U. Answer (D) is incorrect because the variable overhead spending variance is $22,000U.

148

.

($5.25-$5.00) x 9,800 mh = $2,450 unfavorable

149

.

($11.00-$11.25) x 15,000 mh = $3,750 favorable

150

.

[12,000 – (5,800 x 2)] x $3 = $1,200 (U)

151

. Answer (A) is correct. The variable overhead efficiency variance equals the difference between actual and standard direct labor hours times the standard cost per hour. Fixed overhead was budgeted at $600,000 ($3 x 200,000 expected units). Thus, total variable overhead was estimated to be $300,000 ($900,000 total OH - $600,000), and the variable overhead application rate was $.75 per hour [$300,000 ÷ (2 hours x 200,000 units)]. Standard hours for actual production are 396,000 (198,000 units x 2). Actual hours worked were 440,000. Hence, the variable overhead efficiency variance is $33,000 [$.75 x (440,000 actual hours - 396,000 standard hours for actual output)]. The variance is unfavorable because actual hours exceeded budgeted hours. Answer (B) is incorrect because the variable overhead efficiency variance is $33,000U. Answer (C) is incorrect because the variable overhead efficiency variance is $33,000U. Answer (D) is incorrect because the variable overhead efficiency variance is $33,000U.

152

Variable budget allowance for actual hours (2,100 x $3)$6,300Variable budget allowance for standard hours ($3 x 1,000 x 2) 6,000$300unfavorable 153 . (12,000 – 10,000) x ($24,000/12,000) = $4,000 (U) 154

.

[9,800 – 10,000] x $5.00 = $1,000 favorable

155

.

[15,000 - (30,000 x .45) mh] x $11.25 = $16,875 unfavorable

156

.

$1200 (F) - $360 (U) = $1,560 (F)

157

.

$600 (F) - 180 (U) = $780 (F)

158

.

$16,800 - $18,000 = $1,200 (F)

159

.

$8,400 - $9,000 = $600 (F)

160

. Answer (D) is correct. The variable delivery expense should total $166,400 given sales of 52,000 units ($160,000 ÷ 50,000 units = $3.20 per unit). Thus, the variance is $3,400 ($166,400 - $163,000). It is favorable since the actual cost is less than that budgeted. Answer (A) is incorrect because the total variable delivery expense will increase as production increases. Answer (B) is incorrect because the variance is favorable. Answer (C) is incorrect because the total variable delivery expense will increase as production increases.

161

. Answer (B) is correct. The $144,000 annual amount equals $12,000 per month. Since volume is expected to be 5,000 units per month, and the $12,000 is considered a variable cost, budgeted cost per unit is $2.40 ($12,000 ÷ 5,000 units). If 4,500 units are produced, the total variable costs should be $10,800 (4,500 units x $2.40). Subtracting the $10,100 of actual costs from the budgeted figure results in a favorable variance of $700. Answer (A) is incorrect because $1,900 is calculated using 5,000 units produced instead of the actual 4,500. Answer (C) is incorrect because $1,900 is calculated using 5,000 units produced instead of the actual 4,500. Answer (D) is incorrect because the $700 variance is favorable.

162

.

$37,000 - (5,800 x $3 x 2) = $2,200 (U)

163

.

$242,000 – [22,000 x ($161,250/15,000)] = $5,500 unfavorable

164

.

$342,000 – [18,000 x ($360,000/20,000)] = $18,000 unfavorable

165

. Answer (D) is correct. Since depreciation is a fixed cost, that cost will be the same each month regardless of production. Therefore, the budget for September would show depreciation of $21,500 ($258,000 annual depreciation x 1/12). Answer (A) is incorrect because depreciation is a fixed cost that will be the same each month regardless of production. The budget for September would show depreciation of $21,500 ($258,000 x 1/12). Answer (B) is incorrect because $20,425 is based on the units-ofproduction method. Answer (C) is incorrect because $20,500 is the amount shown in the accounts.

166

.

$120,000, the same lump sum as the static budget

167

.

$120,000, the same lump sum as the static budget

168

.

$300,000/$3 = 100,000 DLH

169

. Answer (C) is correct. Fixed overhead is applied at the rate of $3 per unit. The amount applied given actual production is $594,000 ($3 x 198,000 units). Answer (A) is incorrect because the fixed overhead applied is $594,000. Answer (B) is incorrect because the fixed overhead applied is $594,000. Answer (D) is incorrect because the fixed overhead applied is $594,000.

170

.

[25,000 x (6,000/24,000)] x $20.00 = $125,000

171

.

[10,000 x (6,000/12,000)] x $20.00 = $100,000

172

. Answer (D) is correct. The budgeted depreciation expense should be $100,000 at all levels of production. Thus, the variance will be $3,000 unfavorable ($100,000 budgeted $103,000 actual). Answer (A) is incorrect because the variance is unfavorable. Answer (B) is incorrect because the variance is unfavorable. Answer (C) is incorrect because a flexible budget fixed cost should not increase when production increases.

173

. Answer (C) is correct. The $324,000 for supervisory salaries is a fixed cost, at a rate of $27,000 per month. Since these costs are fixed, volume is irrelevant. Thus, the variance is the difference between actual costs of $28,000 and the budgeted costs of $27,000, which equals $1,000 unfavorable. Answer (A) is incorrect because $350 results from calculating supervisory salaries on the basis of volume rather than as fixed costs {[($324,000 ÷ 180,000 units) x 15,750 units] $28,000}. Answer (B) is incorrect because $350 results from calculating supervisory salaries on the basis of volume rather than as fixed costs {[($324,000 ÷ 180,000 units) x 15,750 units] - $28,000}. Answer (D) is incorrect because the variance is $1,000 unfavorable. Actual costs are greater than budgeted costs.

174

.

175

. Answer (B) is correct. Actual fixed overhead was $575,000. Budgeted fixed overhead was $3 per unit at an estimated production of 200,000 units; a total of $600,000. The difference of $25,000 is a favorable variance because the actual amount was less than that budgeted. Answer (A) is incorrect because the fixed overhead spending variance is $25,000F. Answer (C) is incorrect because the fixed overhead spending variance is $25,000F. Answer (D) is incorrect because the fixed overhead spending variance is $25,000F.

176

.

$35,000 – (10,000 x $3) = $5,000 (U)

177

.

$13,000 - $12,000 = $1,000 (U)

178

.

$123,000 actual costs - $120,000 budgeted cost = $3,000 unfavorable

$315,000 –$300,000 = $15,000 (U)

179

Budget allowance based on standard hours allowed [(52,000 x $6) + $250,000] $562,000 Factory overhead applied at standard 572,000 Volume variance$(10,000)favorable 180 . $300,000 – (55,000 x 2 x $3) = $30,000 (F) 181

.

182

. Answer (A) is correct. The fixed overhead volume variance results when production varies from the denominator amount. The denominator amount is the level of production used to determine the standard cost per unit. Because production was expected to be 200,000 units (the denominator level), but actual production was only 198,000 units, an unfavorable volume variance of 2,000 units occurred. Thus, 2,000 units were not charged

($3 x 10,000) – ($3 x 9,000) = $3,000 (U)

with $3 per unit of overhead, and the volume variance in dollars was $6,000U (2,000 units x $3). This underapplication of fixed overhead is unfavorable because it indicates an underuse of facilities; that is, activity was less than budgeted. Unlike other variances, this variance does not measure deviations from expected costs but rather the departure from the expected use of productive capacity. Answer (B) is incorrect because the fixed overhead volume variance is $6,000U. Answer (C) is incorrect because the fixed overhead volume variance is $6,000U. Answer (D) is incorrect because the fixed overhead volume variance is $6,000U. 183

.

$120,000 - [25,000 x (6,000/24,000) x $20.00] = $5,000 favorable

184

.

$120,000 - [10,000 x (6,000/12,000) x $20.00] = $20,000 unfavorable

185

.

$122,000 - [10,000 x (6,000/12,000) x $20.00] = $22,000 underallocated

186

.

$108,000 – $2,600 = $105,400

187

.

$400,000 + $16,000 = $416,000

188

.

$210,000 - $8,000 = $202,000

189

. Answer (D) is correct. The predetermined overhead application rate is $15 [($1,200,000 FOH + $2,400,000 VOH) ÷ 240,000 machine hours]. Answer (A) is incorrect because $5 is the fixed overhead application rate. Answer (B) is incorrect because $25 is the fixed overhead per labor hour. Answer (C) is incorrect because $10 is the variable portion of the overhead application rate.

190

. Answer (B) is correct. Overhead is applied on the basis of planned machine hours. The predetermined overhead application rate is $15 [($1,200,000 FOH + $2,400,000 VOH) ÷ 240,000 machine hours]. Thus, total overhead applied was $315,000 ($15 x 21,000 planned machine hours based on output). Answer (A) is incorrect because the total overhead applied was $315,000 based on 21,000 hours at $15 per hour. Answer (C) is incorrect because the total overhead applied was $315,000 based on 21,000 hours at $15 per hour. Answer (D) is incorrect because $300,000 is based on planned direct labor hours at $75 per hour.

191

. Answer (B) is correct. Variable overhead applied in November was $210,000 [21,000 planned machine hours based on output x ($2,400,000 planned annual VOH ÷ 240,000 planned machine hours)]. Because the applied overhead was less than actual ($214,000), underapplied variable overhead equaled $4,000. Answer (A) is incorrect because the overhead was underapplied. Answer (C) is incorrect because the overhead was underapplied. Answer (D) is incorrect because $6,000 is based on the 22,000 machine hours planned for November rather than the planned hours for actual output.

192

. Answer (A) is correct. The variable overhead spending variance equals the difference between actual variable overhead and the product of the actual input and the budgeted application rate. At a variable overhead application rate (standard cost) of $10 per machine hour ($2,400,000 ÷ 240,000 hours), the total standard cost for the 21,600 actual hours was $216,000. Given actual costs of $214,000, the favorable variance is $2,000. Answer (B) is incorrect because $6,000 is based on planned machine hours of 22,000. Answer (C) is incorrect because the variance is favorable. Answer (D) is incorrect because the variance is favorable.

193

. Answer (D) is correct. The fixed overhead volume (idle capacity) variance is the difference between budgeted fixed costs and the product of the standard fixed overhead

cost per unit of input and the standard units of input allowed for the actual output. Budgeted fixed costs for the month were $100,000. The standard cost of actual output was $105,000 [21,000 machine hours planned for actual output x ($1,200,000 planned annual FOH ÷ 240,000 planned annual machine hours) FOH application rate]. Hence, the fixed overhead volume variance was $5,000 favorable. It was favorable because the budget for fixed overhead was less than the amount applied to jobs. An overapplication of fixed overhead suggests that output exceeded expectations. Answer (A) is incorrect because the variance was favorable. Answer (B) is incorrect because the variance was favorable. Answer (C) is incorrect because $10,000 is based on 22,000 planned machine hours. 194

.

$150,000/($100,000 + $50,000 + $150,000) x $24,000 = $12,000

195

. Adjustment to cost of goods sold = $200,000/($25,000 + $75,000 + $200,000) x $120,000 = $200,000/$300,000 x $120,000 = $80,000 Cost of goods sold$400,000Add: Adjustment for underapplied overhead

80,000Adjusted cost of goods sold$480,000

196

. (D) the requirement is to determine the amount of costs of goods sold to be reported on the 2002 income statement. The balance in the cost of goods sold account is $720,000. This amount must be increased by the portion of underapplied overhead allocated to cost of goods sold. The underapplied overhead is appropriately allocated to work in process, finished goods, and cost of goods sold. No overhead is allocated to direct materials inventory, since this account contains only the cost of unused materials. The other three accounts contain the cost of materials, labor, and overhead. The amounts to be allocated to work in process, finished goods,a nd cost of goods sold are determined by each account’s relative balance as compared to the total balance in the accounts. The total balance of the three accounts is $864,000 ($720,000 + $54,000 + $90,000). Therefore, the amount allocable to cost of goods sold is [($720,000/$864,000) x $45,000) or $37,500. Since overhead is underapplied, not enough costs were applied to production during the year. Thus, cost of goods sold is increase to $757,500 ($720,000 + $37,500).

197

.

(5,600 x $40) + (5,600 x $49.20) = $499,520

198

.

(800 x $40) + (800 x .75 x $49.20) = $61,520

199

.

100,000 x $.78 = $78,000

200

.

8,000 x 4 x $3.60 = $115,200

201

.

26,000 - (8,000 x 3 x $1) = $2,000

202

.

The variance would be allocated only to finished goods and cost of goods sold.

203

. Answer (B) is correct. The direct materials efficiency variance equals the standard unit price times the difference between inputs actually used and inputs that should have been used, or $1,680 unfavorable {[10,920 lbs. - (2,100 units x 5 lbs.)] x $4}. Answer (A) is incorrect because $1,092 unfavorable equals the price variance. Answer (C) is incorrect because $3,680 unfavorable assumes 10,000 pounds should have been used. Answer (D) is incorrect because $3,772 unfavorable assumes 10,000 pounds should have been used and that the standard price was $4.10.

204

. Answer (A) is correct. The direct labor flexible budget variance (the total direct labor variance) equals actual direct labor cost minus standard direct labor cost for actual output produced, or $500 favorable [$20,500 - ($10 x 2,100 units)]. Answer (B) is incorrect because the variance was favorable. Answer (C) is incorrect because $1,000 favorable is the labor efficiency variance. Answer (D) is incorrect because both hours

and wage rate varied and did not offset each other. 205

. Answer (B) is correct. The direct materials price variance equals the actual price minus the standard price, times the actual quantity used in production. The variance is $760,000 unfavorable [($28 - $24) x 190,000]. The variance is unfavorable because the actual price exceeded the standard price. Answer (A) is incorrect because the variance is unfavorable. Answer (C) is incorrect because $240,000 is the direct materials efficiency variance. Answer (D) is incorrect because $156,000 is the direct labor rate variance.

206

. Answer (B) is correct. The direct materials efficiency variance equals the actual quantity minus the standard quantity, times standard price. The variance is $240,000 favorable {[190,000 - (10 x 20,000)] x $24}. The variance is favorable because the actual quantity was less than the standard quantity allowed for the actual output. Answer (A) is incorrect because $156,000 favorable is the direct labor rate variance. Answer (C) is incorrect because the variance is favorable. Answer (D) is incorrect because $760,000 is the direct materials price variance.

207

. Answer (C) is correct. The direct labor rate variance equals the actual rate minus the standard rate, times the actual amount of labor used. The variance is $156,000 favorable [($18 - $20) x 78,000]. The variance is favorable because the actual rate was less than the standard rate. Answer (A) is incorrect because $240,000 favorable is the direct materials efficiency variance. Answer (B) is incorrect because the variance was favorable. Answer (D) is incorrect because $40,000 results from multiplying the actual units of output by the difference between the actual rate and standard rate.

208

.

(110 - 100) x $2 = $20 (U)

209

.

110 x ($2.00 - $1.90) = $11 (F)

210

.

(184 - 200) x $10 = $160 (F)

211

. Answer (B) is correct. The direct materials price variance equals the actual quantity purchased times the difference between the actual and standard unit costs. The standard unit cost for direct materials is $1.80 per pound. The actual cost for 160,000 pounds was $304,000, or $1.90 per pound. The variance is unfavorable because the actual price exceeded the standard price. Thus, the variance is $16,000U ($.10 x 160,000 lbs.). Answer (A) is incorrect because the price variance is $16,000U. Answer (C) is incorrect because the price variance is $16,000U. Answer (D) is incorrect because the price variance is $16,000U.

212

. Answer (D) is correct. The direct materials quantity variance equals the standard price ($1.80 per pound) times the difference between the actual and standard quantities. The actual quantity used was 142,500 pounds. The standard quantity is 8 pounds per unit of product. Given that 19,000 units were produced, the standard quantity for the actual output was 152,000 pounds (8 lbs. x 19,000 units). Hence, the direct materials quantity variance is $17,100 [$1.80 x (152,000 - 142,500)]. Since the actual quantity used was less than the standard quantity, the variance is favorable. Answer (A) is incorrect because the direct materials quantity variance is $17,100F. Answer (B) is incorrect because the direct materials quantity variance is $17,100F. Answer (C) is incorrect because the direct materials quantity variance is $17,100F.

213

. Answer (A) is correct. The direct labor rate variance equals the actual quantity of labor used times the difference between the actual and standard prices for labor. The actual total price of labor was $42,000, 90% of which was for direct labor. Thus, the price of direct labor

was $37,800. A total of 5,000 hours of direct labor was worked. Thus, the actual hourly rate was $7.56 ($37,800 ÷ 5,000 hrs.), and the variance is $2,200 [5,000 hrs. x ($8.00 - $7.56)]. The actual rate was less than standard, so the variance is favorable. Answer (B) is incorrect because the labor rate variance is $2,200F. Answer (C) is incorrect because the labor rate variance is $2,200F. Answer (D) is incorrect because the labor rate variance is $2,200F. 214

. Answer (C) is correct. The direct labor efficiency variance equals the standard labor rate times the difference between actual and standard hours. Because each unit requires .25 hours of labor, the standard hours allowed for November would have been 4,750 (.25 x 19,000 units of output). Accordingly, the variance is $2,000 [$8.00 standard rate x (5,000 actual hrs. - 4,750 standard hrs.)]. This variance is unfavorable because the actual hours exceeded the standard hours. Answer (A) is incorrect because the direct labor efficiency variance is $2,000U. Answer (B) is incorrect because the direct labor efficiency variance is $2,000U. Answer (D) is incorrect because the direct labor efficiency variance is $2,000U.

215

. Answer (B) is correct. The materials price variance equals the actual quantity purchased times the difference between actual and standard unit prices. Actual cost was $475,000, or $3.80 per pound. Hence, the variance is $25,000 unfavorable [125,000 pounds x ($3.80 $3.60)]. Answer (A) is incorrect because the variance is unfavorable. The purchase price exceeded standard cost. Answer (C) is incorrect because the variance is unfavorable. The purchase price exceeded standard cost. Answer (D) is incorrect because the price variance is computed on the actual quantity purchased, not the quantity used.

216

. Answer (D) is correct. This variance equals the standard unit cost times the difference between the actual quantity used and the standard quantity for good production. Consequently, the variance is $7,200 favorable {$3.60 x [(5 pounds x 22,000 units) 108,000 pounds used]}. Answer (A) is incorrect because the variance is favorable. Actual usage was less than the standard. Answer (B) is incorrect because the variance is calculated by multiplying the quantity difference times the standard unit cost of $3.60, not the actual unit cost. Answer (C) is incorrect because the variance is favorable. Actual usage was less than the standard.

217

. Answer (A) is correct. The direct labor rate variance equals the actual quantity of hours worked times the difference between the standard and actual labor rates. Total direct labor cost was $327,600 (90% x $364,000), and the actual unit direct labor cost was $11.70 ($327,600 ÷ 28,000 hours). Thus, the variance is $8,400 favorable [28,000 hours x ($12 $11.70)]. Answer (B) is incorrect because the variance is favorable. The actual labor rate was less than the standard rate. Answer (C) is incorrect because the variance is favorable. The actual labor rate was less than the standard rate. Answer (D) is incorrect because $6,000 is the labor efficiency variance, not the labor rate variance.

218

. Answer (B) is correct. The direct labor efficiency variance equals the standard unit cost times the difference between actual hours and standard hours. Accordingly, the variance is $6,000 unfavorable {$12 x [28,000 hours - (1.25 hours x 22,000 units)]}. Answer (A) is incorrect because the variance is unfavorable. More hours were worked than allowed by the standards. Answer (C) is incorrect because the labor efficiency variance is $6,000 unfavorable. Answer (D) is incorrect because the variance is unfavorable. More hours were worked than allowed by the standards.

219

.

$30,000 + 500 U – 1,500 F = $29,000

220

.

(490 x $32) – (5,000 x 0.10 x $30) = 680 U

221

.

490 ($32 - $30) = 980 U

222

.

$30 (490 – 500) = 300 F

223

.

250 dlh ($15.25 - $15.00) = $62.50 U

224

.

[250 dlh - (5,000 x 0.05)] x $15 = Zero

225

.

(2200 x $24) – (10,000 x 0.20 x $25) = 2,800 U

226

.

2200 ($24 - $25) = 2,200 F

227

.

$25 [2200 – (10,000 x 0.20)] = 5,000 U

228

.

(1050 x $14.75) - (10,000 x 0.10 x $15) = $487.50 U

229

.

1050 dlh ($14.75 - $15.00) = $262.50 F

230

.

[1050 dlh - (10,000 x 0.10)] x $15 = 750 U

231

. Answer (D) is correct. The total materials price variance is found by multiplying the difference between the standard price and the actual price by the actual quantity. The actual price is calculated by dividing actual cost by actual quantity. Therefore, the actual price for housing units is $20/unit ($44,000 ÷ 2,200), for printed circuit boards, $16/unit ($75,200 ÷ 4,700), and for reading heads, $11/unit ($101,200 ÷ 9,200). Thus, total materials price variance is Housing units: 2,200 x ($20 - $20) = $ 0Printed circuit boards: 4,700 x ($15 - $16) =4,700 UReading heads: 9,200 x ($10 - $11) =9,200 U $13,900 UAnswer (A) is incorrect because $346,500 favorable results from using the standard cost per unit for each direct material, and also by reversing the order of subtraction. Answer (B) is incorrect because $346,500 unfavorable results from using the standard cost per unit for each direct material. Answer (C) is incorrect because the price variance is unfavorable when the actual price is greater than the standard price.

232

. Answer (A) is correct. The total materials quantity variance is found by multiplying the difference between the standard quantity and actual quantity by the standard price. Standard quantities are calculated by multiplying the actual units by the standard quantity per unit. In this example, the standard quantity for housing units is 2,200 parts (2,200 x 1); for printed circuit boards, 4,400 parts (2,200 x 2); and for reading heads, 8,800 parts (2,200 x 4). Therefore, the total materials quantity variance is Housing units: $20 x (2,200 - 2,200) = $ 0Printed circuit boards: $15 x (4,400 - 4,700) = 4,500 UReading heads: $10 x (8,800 - 9,200) = 4,000 U $8,500 UAnswer (B) is incorrect because $8,500 favorable results from reversing the order of subtraction. Answer (C) is incorrect because $9,200 unfavorable results from multiplying by actual price. Answer (D) is incorrect because $9,200 favorable results from multiplying by the actual price and reversing the order of subtraction.

233

. Answer (A) is correct. The variable overhead efficiency variance is found by multiplying the difference between standard hours and actual hours by the standard rate. The number of standard hours is calculated by multiplying the actual units by the standard hours per unit. Therefore, the number of standard hours is 9,900 ($2,200 x 4.5 hours per unit), and the variable overhead efficiency is $0 [$2 x (9,900 - 9,900)]. Answer (B) is incorrect because $900 unfavorable results from multiplying by the budgeted number of units, 2,000, instead of actual, 2,200. Answer (C) is incorrect because $9,900 unfavorable results from using a standard hours per unit rate of 9 hours and reversing the

order of subtraction. Answer (D) is incorrect because $9,900 favorable results from using a standard hours per unit rate of 9 hours. 234

. Answer (B) is correct. The variable overhead spending variance is found by subtracting actual variable overhead from the product of actual hours and the standard rate. Therefore, the variable overhead spending variance is $1,000 favorable [(9,900 x $2) - $18,800]. Answer (A) is incorrect because $1,000 unfavorable results from reversing the order of subtraction. Answer (C) is incorrect because $1,800 unfavorable results from using the budgeted variable overhead and by reversing the order of subtraction. Answer (D) is incorrect because $1,800 favorable results from using the budgeted variable overhead.

235

. Answer (C) is correct. The contribution margin volume variance is found by multiplying budgeted unit contribution by the difference between actual units and budgeted units. The budgeted unit contribution in this example is $61 ($122,000 ÷ 2,000 units). Therefore, the variance is $12,200 favorable [$61 per unit x (2,200 actual units - 2,000 budgeted units). Answer (A) is incorrect because $9,800 unfavorable results from multiplying by the actual unit contribution and reversing the order of subtraction. Answer (B) is incorrect because $9,800 favorable results from multiplying by the actual unit contribution. Answer (D) is incorrect because $14,660 unfavorable is the variance between budgeted and actual contribution margins.

236

. Answer (C) is correct. The flexible budget provides for a cost of $1,000 per article ($10,000,000 ÷ 10,000 articles). Each article should require 20 hours of labor (200 hours ÷ 10 articles). Thus, the standard labor rate is $50 per hour ($1,000 ÷ 20 hours), and total standard variable labor cost is $9,500,000 (9,500 articles x 20 hours x $50 per hour). Accordingly, total expected costs are $10,100,000 ($9,500,000 + $600,000 FC). Answer (A) is incorrect because $9,500,000 equals variable labor costs only. Answer (B) is incorrect because adding the $600,000 of fixed costs to the $9,500,000 of variable labor costs produces a total cost of $10,100,000. Answer (D) is incorrect because labor costs will decline as production declines, but fixed costs will not.

237

. Answer (A) is correct. Budgeted fixed costs are $600,000. The actual fixed costs were $618,000 ($9,738,000 total costs - $9,120,000 flexible costs). Because actual costs were $18,000 higher than the budget, the variance is unfavorable. Answer (B) is incorrect because the variance was unfavorable. Answer (C) is incorrect because $48,000 is based on a false presumption that fixed costs will be less at a 9,500 production level than a 10,000 level. Answer (D) is incorrect because the variance was unfavorable.

238

. Answer (A) is correct. The labor efficiency variance is the difference between standard and actual hours, multiplied by the standard cost per hour. The standard labor rate is $50 per hour, and the standard time allowed for 9,500 articles is 190,000 hours (9,500 x 20). Actual hours worked totaled 192,000. Thus, an unfavorable variance of 2,000 hours occurred. The unfavorable labor efficiency variance was therefore $100,000 ($50 x 2,000 hours). Answer (B) is incorrect because $238,000 is the difference between total (fixed + variable) standard labor cost ($9,500,000) and total actual cost ($9,738,000). Answer (C) is incorrect because the variance is unfavorable. Answer (D) is incorrect because the efficiency variance is based on standard hours for actual production levels--in this case 190,000 hours.

239

Answer (D) is correct. The variable overhead spending and efficiency variances are the components of the total variable overhead variance. Given that actual variable overhead was $80,000 and the flexible budget amount was $90,000, the total variance is $10,000 favorable. If the overhead spending variance is $2,000 favorable the efficiency variance must be $8,000 favorable ($10,000 total - $2,000 spending). At a rate of $20 per hour, this variance is equivalent to 400 direct labor hours ($8,000 ÷ $20).

Answer (A) is incorrect because the variances are favorable. Answer (B) is incorrect because 100 direct labor hours are equivalent to the spending variance ($20 x 100 hours = $2,000). Answer (C) is incorrect because the variances are favorable. 240

241

. Answer (D) is correct. Variable overhead variances can be subdivided into spending and efficiency components. However, fixed overhead variances do not have an efficiency component because fixed costs, by definition, are not related to changing levels of output. Consequently, there is no concept of efficiency with respect to the incurrence of fixed costs. Fixed overhead variances are typically subdivided into a budget (or fixed overhead spending) variance and a volume variance. Answer (A) is incorrect because efficiency variances are applicable to variable costs. Answer (B) is incorrect because efficiency variances are applicable to variable costs. Answer (C) is incorrect because efficiency variances are applicable to variable costs.

.

Answer (A) is correct. The fixed overhead spending (budget) variance is the difference between actual and budgeted fixed factory overhead. Actual fixed overhead was $540,000. Budgeted fixed overhead was $5 per hour based on a capacity of 100,000 direct labor hours per month, or $500,000. Because these costs are fixed, the budgeted fixed overhead is the same at any level of production. Hence, the variance is $40,000 unfavorable ($540,000 $500,000). Answer (B) is incorrect because $70,000 unfavorable is the difference between actual fixed overhead and the product of the standard rate and the actual direct labor hours. Answer (C) is incorrect because $460,000 unfavorable is the volume variance. Answer (D) is incorrect because $240,000 unfavorable is the difference between actual variable overhead and budgeted fixed overhead.

242

. Answer (B) is correct. The variable overhead spending variance is the difference between actual variable overhead and the variable overhead based on the standard rate and the actual activity level. Thus, the variable overhead spending variance was $12,000 favorable [$740,000 actual cost - ($8 standard rate x 94,000 actual hours)]. Because actual is less than standard, the variance was favorable. Answer (A) is incorrect because $60,000 favorable is based on 100,000 hours, not the actual hours of 94,000. Answer (C) is incorrect because $48,000 unfavorable is the variable overhead efficiency variance. Answer (D) is incorrect because $40,000 unfavorable is the fixed overhead spending variance.

243

. Answer (A) is correct. The variable overhead efficiency variance equals the standard price ($8 an hour) times the difference between the actual hours and the standard hours allowed for the actual output. Thus, the variance is $48,000 {$8 x [94,000 actual hours - (4 standard hours per unit x 22,000 units produced)]}. The variance is unfavorable because actual hours exceeded standard hours. Answer (B) is incorrect because $60,000 favorable is the variable overhead spending variance calculated based on capacity, not actual hours. Answer (C) is incorrect because $96,000 unfavorable is based on the difference between standard hours allowed for the actual output and capacity hours. Answer (D) is incorrect because $200,000 unfavorable is the excess of actual direct labor costs over actual variable overhead costs.

244

. Answer (B) is correct. The direct labor price variance equals actual labor hours times the difference between standard and actual labor rates. The actual labor cost was $940,000 for 94,000 hours, or $10 per hour. The standard rate was $9 per hour. Thus, the variance is $94,000 [94,000 hours x ($10 - $9)]. The variance is unfavorable because the actual rate paid was higher than the standard rate. Answer (A) is incorrect because $54,000 unfavorable is the direct labor efficiency variance. Answer (C) is incorrect because $60,000 favorable equals the actual rate times the difference between capacity and actual hours. Answer (D) is incorrect because $148,000 unfavorable is the total direct labor variance.

245

. Answer (D) is correct. The direct labor efficiency variance equals the standard rate times the difference between actual and standard hours. Hence, the variance is $54,000 {$9 x [94,000 hours - (4 standard hours per unit x 22,000 units)]}. The variance is unfavorable because the actual hours exceeded the standard hours. Answer (A) is incorrect because $108,000 favorable is based on the difference between standard and capacity hours. Answer (B) is incorrect because $120,000 favorable is based on the actual rate and the difference between standard hours and capacity. Answer (C) is incorrect because $60,000 favorable is based on the actual rate and the difference between actual hours and capacity.

246

. Answer (C) is correct. The materials quantity variance equals the standard price times the difference between the actual and standard quantities. Hence, the favorable materials quantity variance is $4,950 [$1.50 standard x 1,650 units x (60 standard pounds - 58 actual pounds)]. Answer (A) is incorrect because $14,355 is the amount of the materials price variance. Answer (B) is incorrect because $14,355 is the amount of the materials price variance. Answer (D) is incorrect because a favorable variance exists. The standard amount for the actual output exceeded the actual amount.

247

. Answer (A) is correct. The materials price variance equals the actual quantity used times the difference between the actual and standard price per unit. Thus, the unfavorable materials price variance is $14,355 [58 actual pounds x 1,650 units x ($1.65 actual price $1.50 standard price)]. Answer (B) is incorrect because $14,850 is based on the standard unit quantity, not the actual quantity. Answer (C) is incorrect because the price variance is unfavorable. The actual price is greater than the standard price. Answer (D) is incorrect because $14,850 is based on the standard unit quantity, not the actual quantity.

248

. Answer (B) is correct. The labor rate variance equals the actual hours used times the difference between the actual and standard rates. Consequently, the labor rate variance is zero [3.1 actual hours x 1,650 units x ($12 per hour standard rate - $12 per hour actual rate)]. Answer (A) is incorrect because $1,920 is the amount of the flexible budget overhead variance. Answer (C) is incorrect because $4,950 is the amount of the quantity variance. Answer (D) is incorrect because $4,950 is the amount of the quantity variance.

249

. Answer (D) is correct. The flexible budget overhead variance is the difference between actual overhead costs and the flexible budget amount for the actual output. Standard total fixed costs at any level of production are $27,000. Standard variable overhead is $9 per unit ($3 x 3 labor hours). Thus, total standard variable overhead is $14,850 for the actual output ($9 x 1,650 units), and the total flexible budget amount is $41,850 ($27,000 FOH + $14,850 VOH). Accordingly, the favorable flexible budget variance is $1,920 ($41,850 flexible budget amount - $39,930 actual amount). Answer (A) is incorrect because $3,270 is the flexible budget amount for an output of 1,800 units. Answer (B) is incorrect because $3,270 is the flexible budget amount for an output of 1,800 units. Answer (C) is incorrect because a favorable variance exists. Actual overhead is less than the standard overhead at the actual production level.

250

. Answer (A) is correct. The materials quantity variance equals the standard price times the difference between the actual and standard quantities. This variance is therefore equal to $9,900 favorable [$1.50 standard unit cost x (116 lbs. used per unit - 120 lbs. standard per unit) x 1,650 units produced]. Answer (B) is incorrect because the quantity variance is favorable. Answer (C) is incorrect because $28,710 is the magnitude of the price variance. Answer (D) is incorrect because $28,710 is the magnitude of the price variance.

251

. Answer (A) is correct. The materials price variance equals the actual quantity used times the difference between the actual and standard prices per unit. This variance therefore equals $28,710 Unfavorable [(116 lbs. x 1,650 units) x ($1.65 - $1.50)]. Answer (B) is incorrect because $29,700 is the magnitude of the variance if the standard quantity is used. Answer (C) is incorrect because the price variance is unfavorable. Answer (D) is incorrect because $29,700 is the magnitude of the variance if the standard quantity is used.

252

. Answer (D) is correct. The labor rate variance equals actual hours used times the difference between actual and standard rates. It is calculated in the same way as the materials price variance. Because the standard rate and actual rate were both $12 per hour, the labor rate variance is $0. Answer (A) is incorrect because $2,700 is the magnitude of the labor efficiency variance if 1,800 units are produced. Answer (B) is incorrect because $2,700 is the magnitude of the labor efficiency variance if 1,800 units are produced. Answer (C) is incorrect because $2,475 Unfavorable is the labor efficiency variance.

253

. Answer (D) is correct. The flexible budget overhead variance is the difference between total actual overhead costs and the amount shown on a flexible budget. Standard fixed costs within the relevant range of production are $54,000. Standard variable overhead is $6 per labor hour, or $18 per unit (3 x $6). Accordingly, budgeted total overhead at the actual output level is $83,700 [($18 VOH x 1,650 units) + $54,000 FOH], and the flexible budget overhead variance is $3,840 Favorable ($79,860 actual - $83,700 budgeted). Answer (A) is incorrect because a favorable variance exists. Answer (B) is incorrect because $6,540 Favorable assumes 1,800 units were produced. Answer (C) is incorrect because a favorable variance exists.

254

.

($48,000 x $15) – (48,000 x $16) = $48,000 favorable

255

.

(48,000 x $16) – (10,000 x 5 x $16) = $32,000 favorable

256

.

$204,000 –(48,000 x $4) = $12,000 unfavorable

257

.

(48,000 x $4) – (10,000 x 5 x $4) = $8,000 favorable

258

.

$175,500 - (22,000 x $8) = $500 (F)

259

.

(22,500 – 22,000) x ($30,000/20,000) = $750 (U)

260

.

$18,000 - (22,000 x (18,000/20,000)) = $1,800 (F)

261

.

$4,500 F + $10,000 U = $ 5,500 U

262

.

$4,500 F + $10,000 U + $15,000 U = $20,500 U; $40,000 U

263

.

$4,500 F + $10,000 U + $15,000 U + $40,000 U = $60,500 U

264

Answer (C) is correct. The total employee benefits include 20% of supervision and direct and indirect labor costs. To find the amount associated with direct labor, 20% of supervision and indirect labor costs are subtracted from total employee benefits [$575,000 - 20% x ($250,000 + $375,000)], or $450,000. Answer (A) is incorrect because 20% of supervision and indirect labor costs need to be subtracted from total employee benefits to determine the employee benefits associated with direct labor costs. Answer (B) is incorrect because $75,000 is the result of deducting 80% of supervision and indirect labor costs from total employee benefits. Answer (D) is incorrect

because 20% of supervision also needs to be deducted. 265

Answer (D) is correct. To determine the variable manufacturing O/H rate, all variable amounts must be totaled ($1,500,000) and divided by the capacity in DLH (300,000). Total Per DLHSupplies $ 420,000 $1.40Indirect labor 375,000 1.25Power 180,000.60Employee benefits: 20% direct labor450,000 1.50 20% indirect labor 75,000.25 Total $1,500,000 $5.00Answer (A) is incorrect because $7.80/hr. is the fixed manufacturing O/H rate per direct labor hour. Answer (B) is incorrect because the variable manufacturing overhead rate is determined by dividing variable expenses (supplies, indirect labor, power, and direct and indirect labor benefits) by direct labor hours. Answer (C) is incorrect because $5.17/hr. incorrectly includes supervision benefits of $50,000.

266

Answer (A) is correct. The variable manufacturing cost to produce a 100-unit lot is 100 times the sum of direct materials, direct labor, and variable O/H per seat. Cushion materials Padding $2.40 Vinyl 4.00Total cushion materials $6.40 Cost increase 10% (given) x1.10Cost of cushioned seat $ 7.04Cushion fabrication labor ($7.50/DLH x .5 DLH) 3.75Variable overhead ($5.00/DLH x .5 DLH) 2.50Total variable cost per cushioned seat $13.29Total variable cost per 100-unit lot $1,329Answer (B) is incorrect because $1,869 is the transfer price plus the opportunity cost of $540 of the Office Division. Answer (C) is incorrect because $789 is the transfer price minus the opportunity cost of $540 of the Office Division. Answer (D) is incorrect because the transfer price based on the variable manufacturing costs is $1,329.

267

Answer (A) is correct. Total fixed O/H is $2,340,000 (see below). It is divided by the 300,000-hour level of activity to determine the $7.80 hourly rate. Supervision $ 250,000Heat and light 140,000Property taxes and insurance 200,000Depreciation 1,700,000Benefits (20% of supervision) 50,000$2,340,000Answer (B) is incorrect because the fixed manufacturing overhead rate is determined by dividing fixed expenses (supervision, heat and light, property taxes and insurance, depreciation, and supervision benefits) by direct labor hours. Answer (C) is incorrect because $5.17/hr. incorrectly includes supervision benefits of $50,000. Answer (D) is incorrect because $5.00/hr. is the variable manufacturing O/H rate per hour.

268

Answer (B) is correct. The labor hours used in cushion fabrication will be used to make the modified cushioned seat. Thus, the labor time freed by not making deluxe stools equals the frame fabrication and assembly time only. The number of economy office stools that can be produced is 125. Labor hours to make 100 deluxe stools (1.5 x 100) 150 hr.Minus: Labor hours to make 100 cushioned seats (cushion fabrication .5 x 100) (50)hr.Labor hours available for economy stool 100 hr.Labor hours to make one economy stool÷.8 hr.Stools produced by extra labor in economy stool production (100 ÷ .8 hr.) 125 stoolsAnswer (A) is incorrect because the total hours available for economy stools needs to be divided by the .8 hr. required to make an economy stool. Answer (C) is incorrect because the total hours available for economy stools needs to be divided by the .8 hr. required to make an economy stool. Answer (D) is incorrect because 150 is the number of hours required to make 100 deluxe stools before considering the hours required to make 100 cushioned seats.

269

Answer (A) is correct. The contribution margin per unit is equal to the selling price minus the variable costs. Variable costs per unit for the deluxe office stool equal $33.30 and the selling price is $58.50. Thus, the contribution margin is $25.20 per unit ($58.50 - $33.30). The total standard cost is $45.00, which includes $11.70 of fixed O/H (1.5 hr. x $7.80), and the variable costs are $33.30 ($45.00 - $11.70).

Answer (B) is incorrect because $15.84 is the contribution margin of the economy office stool. Answer (C) is incorrect because variable costs of $33.30 need to be deducted from the sales price of $58.50. Answer (D) is incorrect because $33.30 is the variable cost which must be deducted from the sales price to yield the contribution margin. 270

Answer (D) is correct. Opportunity cost is the benefit of the next best opportunity forgone. The opportunity cost here is the contribution margin forgone by shifting production to the economy office stool ($2,520 - $1,980 = $540). DeluxeEconomySelling price$58.50$41.60Costs Materials $14.55$15.76 Labor ($7.50 x 1.5)11.25 ($7.50 x .8) 6.00 Variable O/H ($5 x 1.5)7.50 ($5 x .8) 4.00 Fixed O/H-- --Total costs $33.30$25.76Unit CM$25.20$15.84Units produced x 100x 125Total CM $2,520$1,980Answer (A) is incorrect because $789 is the transfer price of $1,329 minus the opportunity cost of $540 of the Office Division. Answer (B) is incorrect because $1,869 is the transfer price of $1,329 plus the opportunity cost of $540 of the Office Division. Answer (C) is incorrect because $1,329 is the transfer price, not the opportunity cost of the Office Division.

271

b. c. d. e.

. a. 14,220 SH 15,616 AH 21,330 lbs 21,210 lbs

7,110 units ($72,310 + 5,770 - 6,980) / (2 x $5) $71,100 / $5 $78,080 / $5 ($130,760 - 3,500 + 720) / $6 $127,260 / $6

b. c. d. e.

. a. 17,468 SH 18,200 AH $4,392 U $96,880

8,734 units ($105,560 - 14,560 - 3,660) / (2 x $5) 8,734 x 2 ($105,560 - 14,560) / $5 (18,200 - 17,468) x 6 (18,200 x $6) - $12,320

b. c. d. e.

. a. $4 ($600,000/300,000 + $2 variable) $1,280,000 ($4 x 320,000) $31,000 overapplied ($1,280,000 - $1,249,000) $9,000 unfavorable {$1,249,000 - [($2 x 320,000) + $600,000]} $40,000 favorable ($1,240,000 budgeted - $1,280,000 applied)

b. c. d. e.

. a. $5 ($200,000/100,000 + $3 variable) $450,000 ($5 x 90,000) $7,000 underapplied ($450,000 - $457,000) $13,000 favorable {$457,000 - [($3 x 90,000) + $200,000]} $20,000 unfavorable ($470,000 budgeted - $450,000 applied)

.

a.

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275

Actual Fixed Overhead Cost $325,880 Flexible Budget Fixed Overhead Cost $324,000Fixed Overhead Cost Applied to Work in Process 302,100 MH x $1.08 $326,268Budget Variance, $1,880 UVolume Variance $2,268 FTotal variance, $388 F Computations -- in this order: (Note: When used in the below algebraic formulas, favorable variances are negative and favorable variances are positive.)

Volume variance = Total variance - Budget variance = $388 F - $1,880 U = -$388 - $1,880 = -$2,268 = $2,268 F Fixed overhead applied = 302,100 MH X $1.08 = $326,268 Flexible budget fixed overhead = Fixed overhead applied - Volume variance = $326,268 - $2,268 F = $326,268 + $2,268 = $324,000 Actual fixed overhead = Fixed overhead applied + Total variance = $326,268 + $388 F = $326,268 - $388 = $325,880 b. Standard MH allowed for production, . Standard hours allowed per unit Units produced c. Fixed overhead in flexible budget, (a) above Standard cost per machine hour MH assumed in flexible budget Standard hours allowed per unit Units assumed in flexible budget

276

.

302,100 ÷ 0.1 3,021,000 $ 324,000 ÷ $1.08 300,000 ÷ 0.1 3,000,000

Budgeted fixed overhead rate = Fixed overhead/Denominator quantity = $84,800/53,000 direct labor-hours = $1.60/direct labor-hour

Actual fixed overhead = Budgeted fixed overhead + Budget variance = $84,800 + $7,200 = $92,000 Actual variable overhead = Total actual overhead – Actual fixed overhead = $262,500 - $92,000 = $170,500 Actual variable overhead rate = Actual variable overhead/Actual hours = $170,500/55,000 = $3.10 Spending variance = AH (AR - SR) = 55,000 ($3.10 - $3.00) = $5,500 U SH X SR = AH X SR - overhead efficiency variance = 55,000 X $3.00 - $15,000 = $15,000 Standard hours allowed = (SH X SR)/SR = $150,000/$3.00

= 50,000 hours Actual units produced = Standard hours allowed/hours per unit = 50,000 hours/2 hours per unit = 25,000 units Volume variance = Budgeted fixed - (SH X SR) = $84,800 - (50,000 X $1.60) = $84,800 - $80,000 = $4,800 U

277

278

Summary:Actual hours5,000 hoursStandard hours allowed50,000 hoursDenominator hours53,000 hoursSpending variance$ 5,500 UEfficiency variance$15,000 UBudget variance$ 7,200 UVolume variance$ 4,800 U . a. Flexible budget allowance, $845,000 [$200,000 + (30,000 x 1 x $4) + (30,000 x 2.5 x 7)] b. Budget variance: $45,000 unfavorable ($845,000 - $890,000) . a. Flexible budget allowance, $438,000 [$300,000 + (23,000 x 3 x $2)] b. Budget variance: $18,000 favorable ($438,000 - $420,000)