Standard Costs and Variance Analysis Part 2

The standard direct labor cost per 10-gallon batch of sherbet is: A. P50.00 C. P25.00 B. P28.75 D. P15.00 Materials variance i. Under a standard cost system, the materials quantity variance was recorded at P1,970 unfavorable, the materials price variance was recorded at P3,740 favorable, and the Goods in Process was debited for P51,690. Ninety-six thousand units were completed. What was the per unit price of the actual materials used? A. P0.52 each C. P0.54 eac B. P0.53 each D. P0.51 each ii.

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

iii.

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

iv.

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

v.

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

vi.

The Bohol Company uses standard costing. The following data are available for October: Actual quantity of direct materials used 23,500 pounds Standard price of direct materials P2 per pound Material quantity variance P1,000 U The standard quantity of materials allowed for October production is: A. 23,000 lbs C. 24,000 lbs B. 24,500 lbs D. 25,000 lbs

vii.

Information on Dulce’s direct material costs for May is as follows: Actual quantity of direct materials purchased and used Actual cost of direct materials Unfavorable direct materials usage variance Standard quantity of direct materials allowed for May production

30,000 lbs. P84,000 P 3,000 29,000 lbs

For the month of May, Dulce’s direct materials price variance was: A. P2,800 favorable C. P2,800 unfavorable B. P6,000 unfavorable D. P6,000 favorable viii.

Information on Katrina Company’s direct material costs is as follows: Standard unit price Actual quantity purchased Standard quantity allowed for actual production Materials purchase price variance – favorable What was the actual purchase price per unit, rounded to the nearest centavos? A. P3.06 C. P3.11 B. P3.45 D. P3.75

ix.

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

x.

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

xi.

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

xii.

Samson Candle Co. manufactures candles in various shapes, sizes, colors, and scents. Depending on the orders received, not all candles require the same amount of color, dye, or scent materials. Yields also vary, depending upon the usage of beeswax or synthetic wax. Standard ingredients for 1,000 pounds of candles are: Input: Standard Mix Standard Cost per Pound Beeswax 200 lbs. 1.00 Synthetic wax 840 lbs. 0.20 Colors 7 lbs. 2.00 Scents 3 lbs. 6.00 Totals 1,050 lbs. 9.20 Standard output 1,000 lbs.

P 3.60 1,600 1,450 P 240

Price variances are charged off at the time of purchase. During January, the company was busy manufacturing red candles for Valentine’s Day. Actual production then was: Input: In Pounds Beeswax 4,100 Synthetic wax 13,800 Colors 2,200 Scents 60 Total 20,160 Actual output 18,500 The material yield variance is: A. P 280 unfavorable C. P 280 favorable B. P3,989 unfavorable D. P3,989 favorable Labor variance xiii. The flexible budget for the month of May 2007 was for 9,000 units with direct material at P15 per unit. Direct labor was budgeted at 45 minutes per unit for a total of P81,000. Actual output for the month was 8,500 units with P127,500 in direct material and P77,775 in direct labor expense. Direct labor hours of 6,375 were actually worked during the month. Variance analysis of the performance for the month of May would show a(n): A. Favorable material quantity variance of P7,500. B. Unfavorable direct labor efficiency variance of P1,275. C. Unfavorable material quantity variance of P7,500. D. Unfavorable direct labor rate variance of P1,275. xiv.

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

xv.

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

xvi.

How much labor yield variances should be reported? A. P6,250 U C. P5,250 F B. P6,250 F D. P5,250 U

xvii.

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

B. P7.94

D. P7.80

xviii.

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

xix.

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

xx.

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

xxi.

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

Questions 30 and 31 are based on the following information. Information on Goodeve Company’s direct labor costs are presented below: Standard direct labor hours Actual direct labor hours Direct labor efficiency variance Favorable Direct labor rate variance Favorable Total payroll xxii.

What was Goodeve’s standard direct labor rate? A. P3.54 C. P3.80 B. P4.00 D. P5.80

xxiii.

What was Goodeve’s actual direct labor rate? A. P3.60 C. P3.80

20,000 21,000 P 3,000 P126,000

P 20 P 1 P8,440 P8,610

30,000 29,000 P 4,000 P 5,800 P110,200

B. P4.00

D. P5.80

xxiv.

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

xxv.

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

xxvi.

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

xxvii.

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

Two-way overhead variance xxviii. The overhead variances for Big Company were: Variable overhead spending variance: P3600 favorable. Variable overhead efficiency variance: P6,000 unfavorable. Fixed overhead spending variance: P10,000 favorable. Fixed overhead volume variance: P24,000 favorable. What was the overhead controllable variance? A. P31,600 favorable C. P24,000 favorable B. P13,600 favorable D. P 7,600 favorable

P7.50 11,000 10,000 P5,500

xxix.

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

xxx.

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

xxxi.

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

xxxii.

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

xxxiii.

Sorsogon Company had actual overhead of P14,000 for the year. The company applied overhead of P13,400. If the overhead budgeted for the standard hours allowed is P15,600, the overhead controllable variance is A. P 600 Favorable C. P1,600 Favorable B. P2,200 Unfavorable D. P1,600 Unfavorable

xxxiv.

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

xxxv.

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

xxxvi.

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

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

Libiran Company produces its only product, Menthol Chewing Gum. The standard overhead cost for one pack of the product follows:

Fixed overhead (1.50 hours at P18.00) P27.00 Variable overhead (1.50 hours at P10.00) 15.00 Total application rate P42.00 Libiran uses expected volume of 20,000 units. During the year, Libiran used 31,500 direct labor hours for the production of 20,000 units. Actual overhead costs were P545,000 fixed and P308,700 variable. The overhead efficiency variance is A. P22,500 Favorable C. P15,000 Favorable B. P22,500 Unfavorable D. P15,000 Unfavorable xxxix.

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

xl.

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

xli.

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

xlii.

The following information is available from the Tyro Company: Actual factory overhead Fixed overhead expenses, actual

P15,000 P 7,200

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

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

xliv.

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

Four-way overhead variance xlv. Safin Corporation’s master budget calls for the production of 5,000 units of product monthly. The annual master budget includes indirect labor of P144,000 annually. Safin considers indirect labor to be a variable cost. During the month of April, 4,500 units of product were produced, and indirect labor costs of P10,100 were incurred. A performance report utilizing flexible budgeting would report a budget variance for indirect labor of: A. P1,900 Unfavorable. C. P1,900 Favorable. B. P 700 Unfavorable. D. P 700 Favorable. xlvi.

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

xlvii.

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

xlviii.

The Pinatubo Company makes and sells a single product and uses standard costing. During January, the company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units of product. The standard cost card for one unit of product includes the following:

Variable factory overhead: 3.0 DLHs @ P4.00 per DLH Fixed factory overhead: 3.0 DLHs @ P3.50 per DLH For January, the company incurred P22,000 of actual fixed overhead costs and recorded a P875 favorable volume variance. The budgeted fixed overhead cost for January is: A. P31,500 C. P30,625 B. P32,375 D. P33,250 xlix.

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

l.

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

li.

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

lii.

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

liii.

Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was P12,000 favorable and the fixed overhead spending variance was P16,000 unfavorable, fixed manufacturing overhead applied must be: A. P516,000 C. P512,000 B. P504,000 D. P496,000

liv.

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

lv.

Richard Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Raw materials P14.50 Direct labor (2 DLH x P8) 16.00 Manufacturing overhead (2 DLH x P11) 22.00 Total standard cost P52.50 The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Richard planned to produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is: Variable P 3,600,000 Fixed 3,000,000 P 6,600,000

During November, Richard produced 26,000 units. Richard used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P260,000 fixed and P315,000 variable. The total manufacturing overhead applied during November was P572,000. The fixed manufacturing overhead volume variance for November is: A. P10,000 favorable C. P10,000 unfavorable B. P3,000 unfavorable D. P22,000 favorable lvi.

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

Question Nos. 65 and 66 are based on the following: Tiny Bubbles Company had the following activity relating to its fixed and variable overhead for the month of July. Actual costs Fixed overhead P120,000 Variable overhead 80,000 Flexible budget (Standard input allowed for actual output achieved x the budgeted rate) Variable overhead

P 90,000

Applied (Standard input allowed for actual output achieved x the budgeted rate) Fixed overhead Variable overhead spending variance Production volume variance

P125,000 1,200 F 5,000 U

lvii.

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

lviii.

The fixed overhead efficiency variance is: A. P 3,000 favorable B. P10,000 unfavorable

C. P 3,000 unfavorable D. Never a meaningful variance

Questions 67 and 68 are based on a monthly normal volume of 50,000 units (100,000 direct labor hours). Raff Co.’s standard cost system contains the following overhead costs: Variable P6 per unit Fixed P8 per unit The following information pertains to the month of March: Units actually produced Actual direct labor hours worked Actual overhead incurred: Variable Fixed lix.

For March, the unfavorable variable overhead spending variance was: A. P6,000 C. P12,000

38,000 80,000 P250,000 384,000

B. P10,000

D. P22,000

lx.

For March, the fixed overhead volume variance was: A. P96,000U C. P80,000U B. P96,000F D. P80,000F

lxi.

Edney Company employs standard absorption system for product costing. The standard cost of its product is as follows: Raw materials P14.50 Direct labor (2 DLH x P8) 16.00 Manufacturing overhead (2 DLH x P11) 22.00 The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Edney planned to produce 25,000 units each month during the year. The budgeted annual manufacturing overhead is Variable P3,600,000 Fixed 3,000,000 During November, Edney produced 26,000 units. Edney used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P260,000 fixed and P315,000 variable. The total manufacturing overhead applied during November was P572,000. The variable manufacturing overhead variances for November are: Spending Efficiency A. P9,000 unfavorable P3,000 unfavorable B. P6,000 favorable P9,000 unfavorable C. P4,000 unfavorable P1,000 favorable D. P9,000 favorable P12,000 unfavorable

lxii.

The fixed manufacturing overhead variances for November are: Spending Volume A. P10,000 favorable P10,000 favorable B. P10,000 unfavorable P10,000 favorable C. P 6,000 favorable P 3,000 unfavorable D. P 4,000 unfavorable P22,000 favorable

.

Answer: A Unit cost of materials: (Debit to Goods in Process + Debit to Materials Quantity Variance - Credit to Materials Price Variance)/Number of Units Completed Total debits to work in process account P51,690 Debit to materials quantity variance 1,970 Credit to materials price variance ( 3,740) Actual materials cost P49,920 Per unit cost: P49,920/96,000 P0.52

.

Answer: A Actual quantity used Add favorable quantity (209/5.5) Standard quantity allowed

i

ii

. Answer: C Actual materials price Standard Quantity Standard price

1,066 38 1,104

iii

105,000/35,000 12,000 x 2 60,000/24,000

3.00 24,000 2.50

Actual Quantity used: Price variance based on usage:

24,000 + (2,500/2.5) 25,000 x (3 – 2.50)

. Answer: D Actual Quantity used Favorable Quantity 3,735/1.5 Standard Quantity allowed Production in units 17,400/15

25,000 12,500

iv

.

Answer: A AQ @ SP (3,150 x 40) SQ @ SP (600 x 5 x 40) Unfavorable Quantity Variance

v

14,910 2,490 17,400 1,160

P126,000 120,000 P 6,000

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

vi

. Answer: D Actual Purchase Costs – (AQ x SP) = 84,000 – (30,000 x 3) 6,000 Favorable Standard Price = Usage Variance ÷ (AQ – SQ) 3,000 ÷ (30,000 – 29,000) = P3

vii

. Answer: B The actual purchase price per unit can be conveniently solved by using the purchase price variance - MPV = AQ(AP-SP) -240 = 1,600 (AP – 3.60) -240 ÷ 1,600 = AP – 3.60 0.15 = AP – 3.60 AP = 3.45

viii

. Answer: C MPV = 1,400(1.10 – 1.00) = 140

ix

.

x

Answer: A MUV = (AQ – SQ)SP = (2,300 – 2,100) 6.25 = 1,250 Unfavorable

. Answer: C Actual materials cost

xi

26,400

AQ @ SP (22,000 x 1.25) Favorable Price Variance

27,500 ( 1,100)

. Answer: A Standard materials cost per batch (200 x 1) + (840 x 0.20) + (7 x 2) + (3 x 6) P400 Expected yield in batch (20,160 ÷ 1,050) 19.20 Actual yield 18.50 Unfavorable yield in batch 0.70 Unfavorable yield variance (0.70 x 400) P 280

xii

. Answer: D Materials Actual cost Budgeted cost (8,500 @ 15) Materials cost variance Labor AH @ SR (6,375 @ 12) SH @ SR (8,500 @ 0.75 @ 12) Labor Efficiency Variance Actual Payroll AH @ SR (6,375 @ 12) Labor Rate Variance

xiii

127,500 127,500 0 76,500 76,500 0 77,775 76,500 1,275

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

xiv

. Answer: A

xv

Labor M F

AH 4,500 3,000 7,500

Std. Mix at AH 5,000 2,500 7,500

Diff (500) 500 -

SR P10 5

. Answer: A Labor Yield Variance: Expected Yield Actual Yield Difference Multiply by Standard labor cost per unit P1.5625* Yield Variance *Standard cost ÷ Standard Yield = P6,250 ÷ 4,000 = P1.5625

Labor Mix Variance P (5,000) 2,500 P (2,500)Fav

xvi

. Answer: C Direct labor cost at standard rate Standard rate

40,000 36,000 4,000 P6,250U

xvii

7,150 – 750 6,400/800

6,400 8.00

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

xviii

10,000 1,000 11,000 5.50

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

xix

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

xx

. Answer: C Actual hours Less Unfavorable hours Standard hours allowed Standard rate: 960,000/60,000

xxi

1,148,000/16.40 120,000/16

70,000 7,500 62,500 16.00

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

xxii

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

xxiii

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

xxiv

. Answer: B Actual direct labor costs Actual hrs at std labor rate Unfavorable labor rate variance Standard labor rate: -3,200 = (34,500 – 35,000) SR 3,200 = 500SR SR = 6.40

P 0.60 P 3.00 50,250 1,700 48,550

xxv

(34,500 x P6.4)

P241,500 220,800 P 20,700

xxvi.

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

xxvii.

Answer: D

xxviii.

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

xxix.

Answer: A Monthly budgeted fixed overhead Applied fixed overhead Unfavorable volume variance

xxx.

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

(150,000/12) (2,450 x 2 x 2.5)

Answer: A Variable OH per DLH 48,000/24,000 Actual overhead Budgeted OH at standard hours: Variable 21,000 x 2 Fixed Favorable controllable/budget variance

12,500 12,250 250 2.00 147,000 42,000 108,000

xxxi.

Answer: A Budgeted fixed overhead Applied fixed overhead based on 80% achieved (24,000 x 3) Unfavorable volume variance Fixed overhead rate based on 27,000 hours: (81,000 ÷ 27,000)

xxxii.

Answer: D Actual overhead Less Budgeted OH at standard hours Variable 32,000 x 5 160,000 Fixed 64,000 Unfavorable budget variance

xxxiii.

Answer: C Actual overhead Budget at SH Favorable controllable variance

14,000 15,600 ( 1,600)

230,000 (224,000) 6,000

150,000 ( 3,000) 81,000 72,000 9,000 3.00

xxxiv.

Answer: C OH application rate based on DL cost Applied overhead Actual overhead Overapplied Overhead

xxxv.

Answer: D Actual overhead Budget at standard hours: Fixed OH Variable OH (32,000 x 5) Unfavorable controllable variance

xxxvi.

Answer: B Budgeted fixed overhead Applied FOH Unfavorable volume variance

600,000/(50,000 x 6) 325,000 x 2

200% 650,000 620,000 30,000 230,000

64,000 160,000

224,000 6,000

(30,000 x 2) (25,000 x 2)

60,000 50,000 10,000

xxxvii. Answer:

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

xxxviii.Answer:

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

15,000 Unfavorable

xxxix.

Answer: A Fixed overhead rate per hour Denominator hours (previous number)

xl.

Answer: B Actual OH (10,300 + 19,500) Less: Budgeted OH at actual hours (P2 x 9,500 hrs) + P10,000 Unfavorable spending variance

xli.

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

8.50 – 6.00 40,000/2.5

2.50 16,000 P29,800 29,000 P 800

3,000U 13,500

xlii.

Answer: A Actual OH Budgeted OH at actual hours (3,500 x P2.50) + P7,000 Favorable spending variance

xliii.

Answer: A Fixed OH spending variance: Actual Fixed OH - Budgeted Fixed OH (P315,000 – P300,000) Fixed OH volume variance: (Budgeted Units – Actual Units) x SFOH rate (50,000 – 55,000) x P6 Budgeted production: P300,000 ÷ P3 ÷ 2 hours

P15,000 15,750 P( 750)

P15,000 U P(30,000)F

xliv.

Answer: A Actual variable overhead AH @ SVOHR (270,000 x 2) Variable Oh spending variance, Favorable AH @ SVOHR SH @ SVOH (260,000 x 2) Unfavorable VOH efficiency variance

xlv.

Answer: D Actual Budget (4,500 x 2.40) Favorable Budget variance

xlvi.

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

xlvii.

Answer: B Actual variable overhead Variable OH applied Unfavorable variable OH variance

xlviii.

Answer: C Applied fixed overhead Less: Favorable volume variance Budgeted fixed overhead

xlix.

Answer: A Standard rate: Excess rate Actual rate

l.

Answer: A Applied fixed overhead Less favorable volume variance Budgeted fixed overhead

li.

Answer: A Unfavorable volume variance Unfavorable VOH spending variance Total Net Unfavorable variance Favorable fixed OH budget variance

25,000 18,000 43,000 2,000 41,000

lii.

Answer: A Net OH variance, Unfavorable Less: Unfavorable volume variance Unfavorable spending variance Favorable FOH budget variance

2,000 ( 18,000) ( 25,000) 41,000

520,000 540,000 ( 20,000) 540,000 520,000 20,000 P10,100 10,800 P( 700) 11.20 672,000

62,400 62,000 400 (3,000 x 3 x 3.50)

50,000/40,000 1,080/3,600

1.25 0.03 1.28 48,000 12,000 36,000

31,500 875 30,625

liii.

Answer: C Budgeted fixed OH Add: Favorable volume variance Applied fixed overhead

500,000 12,000 512,000

liv.

Answer: A Applied FOH (8,000 x 6) Less: Favorable volume variance Budgeted FOH

48,000 12,000 36,000

lv.

Answer: A Budgeted fixed OH (3,000,000 ÷ 12 months) Applied fixed OH (26,000 @ 2 x 5) Favorable volume variance Fixed OH rate per hour (3,000,000 ÷ 600,000)

lvi.

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

lvii.

Answer: D Total variable overhead variance (80,000 – 90,000) Variable overhead spending variance Variable overhead efficiency variance 8,800 ÷ 20

lviii.

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

lix.

Answer: B Actual variable OH Budgeted VOH at actual hours (80,000 x P3) Unfavorable VOH spending variance

lx.

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

lxi.

Answer: B Spending [P315,000 – (53,500 x P6)] Efficiency [(53,500 – 52,000) x P6]

lxii.

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

250,000 260,000 ( 10,000)F 5.00

12,000 9,000 21,000

P(6,000) P 9,000 P10,000U P10,000F

10,000 favorable 1,200 favorable 8,800 favorable 440 Favorable

P250,000 240,000 P 10,000