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Managemant Accounting UNIT 2

Managemant Accounting UNIT 2

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BBA SEM VI

Study Material: Management Accounting

TEST 1 TRUE/FALSE Write TRUE if the statement is correct and FALSE if it is wrong. Avoid ERASURES. 1. Specifications for materials are compiled on a bill of materials. 2. An operations flow document shows all processes necessary to manufacture one unit of a product. 3. A standard cost card is prepared before developing manufacturing standards for direct materials, direct labor, and factory overhead. 4. The total variance can provide useful information about the source of cost differences. 5. The formula for price/rate variance is (AP - SP) x SQ 6. The price variance reflects the difference between the quantity of inputs used and the standard quantity allowed for the output of a period. 7. The usage variance reflects the difference between the price paid for inputs and the standard price for those inputs. 8. The formula for usage variance is (AQ - SQ) * SP 9. The point of purchase model calculates the materials price variance using the quantity of materials purchased. 10. The difference between the actual wages paid to employees and the standard wages for all hours worked is the labor rate variance. 11. The difference between the standard hours worked for a specific level of production and the actual hours worked is the labor rate variance. 12. A flexible budget is an effective tool for budgeting factory overhead. TEST II. Complete the statement by filling the blank 1. The difference between total actual cost incurred and total standard cost applied is referred to as ___________. 2. The difference between what was paid for inputs and what should have been paid for inputs is referred to as a _________________. 3. The difference between standard quantity allowed and quantity used for a unit of output is known as a ______________. 4. The difference between actual variable overhead and budgeted variable overhead based upon actual hours is referred to as the ____________. 5. The difference between actual and budgeted fixed factory overhead is referred to as a ________. 6. When multiple materials are used, the effect of substituting a non-standard mix of materials during the production process is referred to as a ______ variance. 7. When multiple labor categories are used, the financial effect of using a different mix of workers in a production process is referred to as a _______________________ variance. TEST III. Write the letter only for your best answer.

Prepared By: Mahendra Patel, Faculty. Parul Institute of Business Administration

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BBA SEM VI

Study Material: Management Accounting

1. A primary purpose of using a standard cost system is a. To make things easier for managers in the production facility. b. To provide a distinct measure of cost control. c. To minimize the cost per unit of production. d. B and c are correct. 2. The standard cost card contains quantities and costs for a. Direct material only. b. Direct labor only. c. Direct material and direct labor only. d. Direct material, direct labor, and overhead. 3. Which of the following statements regarding standard cost systems is true? a. Favorable variances are not necessarily good variances. b. Managers will investigate all variances from standard. c. The production supervisor is generally responsible for material price variances. d. Standard costs cannot be used for planning purposes since costs normally change in the future. 4. In a standard cost system, Work in Process Inventory is ordinarily debited with a. Actual costs of material and labor and a predetermined overhead cost for overhead. b. Standard costs based on the level of input activity (such as direct labor hours worked). c. Standard costs based on production output. d. Actual costs of material, labor, and overhead. 5. A standard cost system may be used in a. Job order costing, but not process costing. b. Process costing, but not job order costing. c. Either job order costing or process costing. d. Neither job order costing nor process costing. 6. Standard costs may be used for a. Product costing. b. Planning. c. Controlling. d. All of the above. 7. A purpose of standard costing is to a. Replace budgets and budgeting. b. Simplify costing procedures. c. Eliminate the need for actual costing for external reporting purposes. d. Eliminate the need to account for year-end under-applied or over-applied manufacturing overhead. 8. Standard costs a. Are estimates of costs attainable only under the most ideal conditions? b. Are difficult to use with a process costing system. c. Can, if properly used, help motivate employees. d. Require that significant unfavorable variances be investigated, but do not require that significant favorable variances be investigated. 9. A bill of material does not include a. Quantity of component inputs.

Prepared By: Mahendra Patel, Faculty. Parul Institute of Business Administration

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BBA SEM VI
b. Price of component inputs. c. Quality of component inputs. d. Type of product output. 10. An operations flow document

Study Material: Management Accounting

a. Tracks the cost and quantity of material through an operation. b. Tracks the network of control points from receipt of a customer's order through the delivery of the finished product. c. Specifies tasks to make a unit and the times allowed for each task. d. Charts the shortest path by which to arrange machines for completing products. 11. A total variance is best defined as the difference between total a. Actual cost and total cost applied for the standard output of the period. b. Standard cost and total cost applied to production. c. Actual cost and total standard cost of the actual input of the period. d. Actual cost and total cost applied for the actual output of the period. TEST 1 1 2 3 4 Test II 1 2 3 4 8 TOTAL VARIANCE PRICE VARIANCE efficiency variance Variable overhead spending variance. 5 fixed overhead spending variance 6 material mix 7 Labor mix T. T F F 5 6 7 8 F F F T 9 10 11 12 T T F T

TEST III. 1 2 3 4 B D A C 5 6 7 8 C D B C 9 10 11 B C D

23. The difference between actual variable overhead and budgeted variable overhead based upon actual hours is referred to as the variable overhead spending variance. ANS: T 24. The difference between actual variable overhead and budgeted variable overhead based upon actual hours is referred to as the variable overhead efficiency variance. ANS: F 25. The difference between budgeted variable overhead for actual hours and standard overhead is the variable overhead efficiency variance. ANS: T

Prepared By: Mahendra Patel, Faculty. Parul Institute of Business Administration

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Faculty. Parul Institute of Business Administration -4- . Favorable variances are represented by credit balances in the overhead account. ANS: F 36. ANS: T 37.BBA SEM VI Study Material: Management Accounting 26. The difference between budgeted and applied fixed factory overhead is referred to as a fixed overhead volume variance. A fixed overhead volume variance is a controllable variance. ANS: T 28. A fixed overhead volume variance is a no controllable variance. ANS: F 31. A budget variance is a controllable variance. ANS: T 32. An overhead efficiency variance is related entirely to variable overhead ANS: T 35. The difference between actual and budgeted fixed factory overhead is referred to as a fixed overhead volume variance. The difference between actual and budgeted fixed factory overhead is referred to as a fixed overhead spending variance. ANS: F 27. ANS: T Prepared By: Mahendra Patel. Unfavorable variances are represented by debit balances in the overhead account. Managers have no ability to control the budget variance. ANS: F 38. Unfavorable variances are represented by credit balances in the overhead account. A one-variance approach calculates only a total overhead variance ANS: T 33. ANS: F 29. The difference between budgeted variable overhead for actual hours and standard overhead is the variable overhead spending variance. ANS: T 34. ANS: T 30.

Ideal standards are an effective means of controlling variances and motivating workers. ANS: F 40. Prepared By: Mahendra Patel. ANS: F 41. ANS: T 51. Total quality management (TQM) and just-in-time (JIT) production systems are based on the premise of ideal production standards. ANS: T 50. Ideal standards generally yield favorable variances ANS: F 48.BBA SEM VI Study Material: Management Accounting 39. Favorable variances are represented by debit balances in the overhead account. Favorable variances are always desirable for production. Practical standards are the most effective standards for controlling and motivating workers. In a totally automated organization. ANS: F 52. Expected standards are a valuable tool for motivation and control. ANS: F 44. ANS: T 43. Faculty. Expected standards generally yield favorable variances ANS: T 47. Ideal standards do not allow for normal operating delays or human limitations. ANS: T 45. Expected standards generally yield unfavorable variances ANS: F 46. using theoretical capacity will generally provide the highest fixed overhead application rate. A conversion variance combines labor and overhead variances. Ideal standards generally yield unfavorable variances ANS: T 49. Parul Institute of Business Administration -5- . In a totally automated organization. using theoretical capacity will generally provide the lowest fixed overhead application rate. ANS: F 42.

ANS: F 58. ANS: Efficiency variance Prepared By: Mahendra Patel. The effect of substituting a non-standard mix of materials during the production process is referred to as a material yield variance. The two components of total material/labor variance are ____________________ and _________________ ANS: price/rate variance. Faculty. ANS: T 56. the financial effect of using a different mix of workers in a production process is referred to as a labor mix variance. ANS: F 57. the monetary impact of using a higher or lower number of hours than a standard allows is referred to as a labor mix variance. Parul Institute of Business Administration -6- . The effect of substituting a non-standard mix of materials during the production process is referred to as a material mix variance. The difference between total actual cost incurred and total standard cost applied is referred to as ___________. the financial effect of using a different mix of workers in a production process is referred to as a labor yield variance. quantity/efficiency variance 3. When multiple labor categories are used. When multiple labor categories are used. ANS: T 54. ANS: T COMPLETION 1. The difference between what was paid for inputs and what should have been paid for inputs is referred to as a _________________. When multiple labor categories are used. ANS: F 55. When multiple labor categories are used.BBA SEM VI ANS: T Study Material: Management Accounting 53. ANS: price variance 4. The difference between standard quantity allowed and quantity used for a unit of output is known as a ______________. the monetary impact of using a higher or lower number of hours than a standard allows is referred to as a labor yield variance. ANS: total variance 2.

ANS: fixed overhead spending variance. Parul Institute of Business Administration -7- . The difference between actual variable overhead and budgeted variable overhead based upon actual hours is referred to as the ____________. ANS: expected standards 12. The difference between actual and budgeted fixed factory overhead is referred to as a ________.BBA SEM VI Study Material: Management Accounting 5. ANS: variable overhead spending variance. 7. ANS: fixed overhead volume variance. Standards that allow for waste and inefficiency are referred to as _________. 9. ANS: variable overhead efficiency variance. ANS: material mix Prepared By: Mahendra Patel. ANS: practical standards 11. Standards that provide for no human limitations or operating delays are referred to as ________. ANS: practical standards 13. Standards that are attainable with reasonable effort are referred to as __________. Standards that reflect what is expected to occur are referred to as _________. 6. When multiple materials are used. The difference between budgeted and applied fixed factory overhead is referred to as a ________. Faculty. 8. the effect of substituting a non-standard mix of materials during the production process is referred to as a ______ variance. ANS: ideal standards 10. The difference between budgeted variable overhead for actual hours and standard overhead is the __________.

When multiple materials are used. c. Favorable variances are not necessarily good variances. To minimize the cost per unit of production. d. but not process costing. direct labor. Direct material. ANS: material yield 15. Actual costs of material. the difference between the total quantity and the standard quantity of output when a nonstandard mix of materials is used is known as the _________ Variance. Actual costs of material and labor and a predetermined overhead cost for overhead. Direct material and direct labor only. Job order costing. Direct labor only. The standard cost card contains quantities and costs for a. Managers will investigate all variances from standard. but not job order costing. The production supervisor is generally responsible for material price variances. 4. and overhead. the financial effect of using a different mix of workers in a production process is referred to as a __________ variance. Prepared By: Mahendra Patel. Faculty. Process costing. B and c are correct. b. To make things easier for managers in the production facility. Either job order costing or process costing. ANS: A In a standard cost system.BBA SEM VI Study Material: Management Accounting 14. c. ANS: C 5. When multiple labor categories are used. ANS: B 2. c. To provide a distinct measure of cost control. When multiple labor categories are used. b. Standard costs based on the level of input activity (such as direct labor hours worked). Direct material only. A standard cost system may be used in a. d. Work in Process Inventory is ordinarily debited with a. b. c. A primary purpose of using a standard cost system is a. b. Standard costs based on production output. labor. Which of the following statements regarding standard cost systems is true? a. ANS: labor mix 16. d. ANS: D 3. b. d. and overhead. c. Standard costs cannot be used for planning purposes since costs normally change in the future. ANS: labor yield MULTIPLE CHOICES 1. the monetary impact of using a higher or lower number of hours than a standard allows is referred to as a _____ variance. Parul Institute of Business Administration -8- .

An operations flow document a. c. Can. d. Require that significant unfavorable variances be investigated. Budgeted output at actual hours. but do not require that significant favorable variances be investigated. b. Price of component inputs. c. b. c. Specifies tasks to make a unit and the times allowed for each task. Are difficult to use with a process costing system. Budgeted output at standard hours. ANS: C 9. ANS: D 12. Standard costs a. Tracks the network of control points from receipt of a customer's order through the delivery of the finished product. c. c. Tracks the cost and quantity of material through an operation. b. Type of product output. d. Standard cost and total cost applied to production. Eliminate the need for actual costing for external reporting purposes. All of the above. d. if properly used. A purpose of standard costing is to a. Actual cost and total cost applied for the actual output of the period. d. Are estimates of costs attainable only under the most ideal conditions? b. Actual cost and total cost applied for the standard output of the period. Planning. b. Actual cost and total standard cost of the actual input of the period. Faculty. ANS: C 6. A total variance is best defined as the difference between total a. Replace budgets and budgeting. Quantity of component inputs. ANS: B 10. c. d.BBA SEM VI d. Neither job order costing nor process costing. Standard costs may be used for a. ANS: D Study Material: Management Accounting 7. Quality of component inputs. Product costing. b. Eliminate the need to account for year-end under applied or over applied manufacturing overhead. Prepared By: Mahendra Patel. d. Controlling. ANS: B 8. Charts the shortest path by which to arrange machines for completing products. The term standard hours allowed measures a. Simplify costing procedures. b. A bill of material does not include a. ANS: C 11. Parul Institute of Business Administration -9- . help motivate employees.

c. Combined price-quantity variance. the difference between actual and standard price multiplied by actual quantity used yields a a. d. ANS: D 14. Material is purchased. Mix variance. Work in Process. no no yes yes yes no yes WIP Inventory no yes no yes FG Inventory Prepared By: Mahendra Patel. The difference between the actual cost of material purchased and the standard cost of material purchased. and Cost of Goods Sold. b. A large labor efficiency variance is prorated to which of the following at year-end? Cost of Goods Sold a. Carried forward as a balance sheet account to the next period. At the end of a period. whether the variance is favorable or unfavorable ANS: D 15. a significant material quantity variance should be a. d. c. Closed to Cost of Goods Sold. trend of the variances over time c. Finished Goods. When computing variances from standard costs. which of the following factors should not be considered when deciding whether to investigate a variance? a. and Cost of Goods Sold. Allocated among Work in Process. ANS: C Study Material: Management Accounting 13. d. The difference between the actual cost of material purchased and the standard cost of material used. The material price variance (computed at point of purchase) is a. A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when a.10 - . c. likelihood that an investigation will reduce or eliminate future occurrences of the variance d. d. b. d. magnitude of the variance b. c. Finished Goods. b. Quantity variance. ANS: B 17. Actual output at actual hours.BBA SEM VI c. Allocated among Raw Material. Faculty. Material is used in production. Actual output at standard hours. Production is completed. ANS: C 16. Price variance. b. Parul Institute of Business Administration . Material is issued to production. ANS: A 18. b.

Learning curve variance. a (n) a. b. If all sub-variances are calculated for labor.11 - . Mix variance. expected annual b. Rate variance. efficiency of the labor force ANS: C 23. d. If actual direct labor hours (DLHs) are less than standard direct labor hours allowed and overhead is applied on a DLH basis. ANS: A 21. The standard predominantly used in Western cultures for motivational purposes is a (n) _____________________ standard. The mix of workers used in the production process was more experienced than the normal mix. reason for the labor variances d. Faculty. a. d. The purchasing agent acquired very high quality material that resulted in less spoilage. The mix of workers used in the production process was less experienced than the normal mix. Parul Institute of Business Administration . labor rate variance b. Yield variance. b. theoretical Prepared By: Mahendra Patel. The material mix variance. actual hours of labor used c. c. The total labor variance can be subdivided into all of the following except a. d. ANS: A 19. Favorable variable overhead spending variance exists. ANS: C 24. The material yield variance. which of the following cannot be determined? a. Unfavorable volume variance exists. Favorable volume variance exists. c. c. Favorable variable overhead efficiency variance exists. No meaningful number. ideal c. The sum of the material price variance (calculated at point of purchase) and material quantity variance equals a. A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if a. ANS: B 22. b. Primarily the responsibility of the production manager. both a and c. ANS: D 20. b.BBA SEM VI Study Material: Management Accounting c. c. Workers from another part of the plant were used due to an extra heavy production schedule. d. practical d. d. The total cost variance.

c. b. d. normal c. c. Incurred 2. Each unit should take 4 direct labor hours.12 - . The variable overhead efficiency variance a. d. Will be unfavorable. Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate? a. c. b.300 direct labor hours to produce 600 units of product. Gallagher Corporation. Parul Institute of Business Administration . Faculty. Gallagher Corporation applies variable overhead to production on a direct labor hour basis. d. and under applied variable overhead at the end of a period. yes no no no no no yes no no no yes no Practical no yes yes yes no yes no no Expected annual Practical no yes yes no Expected annual ANS: A 27. c. d. ANS: B 26. debit credit debit credit credit debit credit debit VOH efficiency variance credit credit debit debit VMOH ANS: B 29. The journal entry to record these variances and close the variable overhead control account will show which of the following? VOH spending variance a. prior year ANS: A 28. expected annual b. b. Prepared By: Mahendra Patel. Will be favorable. an unfavorable variable overhead efficiency variance. Management would generally expect unfavorable variances if standards were based on which of the following capacity measures? Ideal a. b. theoretical d. Will depend upon the capacity measure selected to assign overhead to production.BBA SEM VI ANS: C Study Material: Management Accounting 25. A company has a favorable variable overhead spending variance. Is impossible to determine without additional information. Which of the following standards can commonly be reached or slightly exceeded by workers in a motivated work environment? Ideal a.

BBA SEM VI ANS: B Study Material: Management Accounting 30. Is the same regardless of the capacity level selected? b. c. Mostly incurred to provide the capacity to produce and are best controlled on a total basis at the time they are originally negotiated. c. d. Fixed overhead spending variance. c. Fixed overhead volume variance. Constant on a per-unit basis at all different activity levels within the relevant range. Be the largest if theoretical capacity had been selected. Fixed overhead costs are a. b. Best controlled as to spending during the production process. yes no no yes yes no yes yes Total overhead budget yes yes no no Volume ANS: D 32. Fixed overhead spending variance. Larger/smaller waste and shrinkage associated with the resources involved than expected. The variance most useful in evaluating plant utilization is the a. d. ANS: B 35. Best controlled on a unit-by-unit basis of products produced.13 - . Not occur if actual capacity were the same as the capacity level selected. b. Variable overhead spending variance. Parul Institute of Business Administration . ANS: D 31. c. A favorable fixed overhead volume variance occurs if Prepared By: Mahendra Patel. Variable overhead efficiency variance. Both b and c are causes. b. Faculty. ANS: A 33. b. Paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base. A company may set predetermined overhead rates based on normal. b. At the end of a period. Fixed overhead volume variance. ANS: D 36. d. c. d. d. c. Material quantity variance. expected annual or theoretical capacity. A variable overhead spending variance is caused by a. d. ANS: D 34. Which of the following are considered controllable variances? VOH spending a. Variable overhead efficiency variance. Using more or fewer actual hours than the standard hours allowed for the production achieved. the fixed overhead spending variance would a. The variance least significant for purposes of controlling costs is the a. Be the smallest if theoretical capacity had been selected.

There is a favorable labor efficiency variance. b. b. Variable overhead spending variance. b. If standard hours allowed for good output equal the predetermined activity level for a given period. Controllable variance. Zero. c. Actual fixed overhead is less than budgeted fixed overhead. Actual fixed overhead minus budgeted fixed overhead equals the a. d. c. Favorable. Favorable volume variance. b. b. d. b. depending on the budgeted overhead. Favorable material and labor usage variance. Total overhead spending variance. b. The fixed overhead application rate is a function of a predetermined activity level. c. d. Normal capacity exceeding actual production levels. Parul Institute of Business Administration . Study Material: Management Accounting ANS: D 37. In a standard cost system. ANS: D 42. Either favorable or unfavorable. Applied fixed overhead is greater than budgeted fixed overhead. c. Actual fixed overhead incurred exceeding budgeted fixed overhead. An increase in the level of the finished inventory. Non-controllable variance. d. Unfavorable capacity variance. c. c. Total overhead volume variance. Total overhead efficiency variance. Budgeted fixed overhead is greater than applied fixed overhead. Fixed overhead volume variance. ANS: A 38. Production is greater than planned. d. there will be a (n) a. A favorable fixed overhead spending variance indicates that a. In analyzing manufacturing overhead variances. c. There is a favorable labor rate variance. Faculty. d. Production is less than planned. An over-application of fixed overhead to production. Total actual overhead minus total budgeted overhead at the actual input production level equals the a. ANS: B 39.14 - . Unfavorable manufacturing overhead variance. Fixed overhead spending variance. Unfavorable. ANS: C 43. Budgeted fixed overhead is less than actual fixed overhead. the volume variance is the difference between the Prepared By: Mahendra Patel.BBA SEM VI a. ANS: C 40. ANS: D 41. An unfavorable fixed overhead volume variance is most often caused by a. the volume variance will be a. when production is greater than the estimated unit or denominator level of activity. d.

b. c. Analyzing overhead variances will not help in Prepared By: Mahendra Patel. ANS: A 46. Variance analysis for overhead normally focuses on a. c. the volume variance is computed by subtracting _________ based on standard input allowed for the production achieved from budgeted overhead. Parul Institute of Business Administration . Does not result in under applied or over applied overhead.BBA SEM VI Study Material: Management Accounting a. ANS: A 45. b. b. a.15 - . Predetermined overhead application rate and the flexible budget application rate times actual hours worked. Amount shown in the flexible budget and the amount shown in the debit side of the overhead control account. d. applied overhead b. The difference between budgeted and applied variable overhead. c. Budget variance. The efficiency variance computed on a three-variance approach is a. Is more effective in assigning overhead costs to products. d. b. Volume variances for fixed overhead costs. Under the two-variance approach. The use of separate variable and fixed overhead rates is better than a combined rate because such a system a. budgeted variable overhead ANS: A 48. Budget allowance based on standard hours allowed for actual production for the period and the amount budgeted to be applied during the period. Actual amount spent for overhead items during the period and the overhead amount applied to production during the period. d. d. The overhead variance calculated as total budgeted overhead at the actual input production level minus total budgeted overhead at the standard hours allowed for actual output is the a. Equal to the variable overhead spending variance plus the variable overhead efficiency variance computed on the four-variance approach. Is easier to develop. Spending variance. Efficiency variances for machinery and indirect production costs. c. d. Computed as the difference between applied variable overhead and actual variable overhead. actual overhead c. Computed as actual variable overhead minus the flexible budget for variable overhead based on actual hours worked. c. Is less expensive to operate and maintain. Equal to the variable overhead efficiency variance computed on the four-variance approach. ANS: A 49. Faculty. ANS: C 44. b. Efficiency variance. ANS: C 47. The controllable variance as a lump-sum amount. Volume variance. budgeted fixed overhead plus actual variable overhead d.

4.50 per hour 2. Most variances will be unfavorable. Costs will be controlled well than if lower standards were used. 2. b. Determining why variances occurred. Evaluating performance.610 U ANS: A Material Price Variance = (AP . 1. Variances will not occur because of the zero-defects basis of JIT. 2. Rs. ANS: B Marley Company The following July information is for Marley Company: Standards: Material Labor Actual: Production Material Labor 3. 2.105 F b. 3.SQ) * SP Prepared By: Mahendra Patel.Rs. Faculty.700 F c. 1.700 feet used.700 U b. d.000 direct labor hours @ Rs. 4. Rs. 7. Rs.20 per foot 2. Rs. 9.5 hours per unit @ Rs.750 units produced during the month 8.) 52. Controlling costs. Employees will be strongly motivated to attain the standards. b. Practical standards become ideal standards.000 feet purchased @ Rs. Rs. 3. Rs. b. in a just-in-time inventory system. Parul Institute of Business Administration .0 feet per unit @ Rs.105 U d. d. Standard costing cannot be used. 4. Rs.BBA SEM VI a.050 F c.000 feet purchased = Rs.20) * 9. ANS: B 51.90 per hour (Round all answers to the nearest Rupee. d. Planning costs for future production cycles. Rs. Ideal standards become expected standards.SP) * AQ = (Rs. 4. c. 2.50 per foot 7.890 U ANS: D Material Quantity Variance = (AQ . Refer to Marley Company. Study Material: Management Accounting ANS: C 50. 2.700 U 53.16 - . What is the material quantity variance? a.50 . c. No incentive bonus will be paid.610 F d. What is the material price variance (calculated at point of purchase)? a. A company using very tight (high) standards in a standard cost system should expect that a. 7. a. c. Refer to Marley Company.

300 hrs. Parul Institute of Business Administration . Rs. 7.5 hr/unit * 2. 4. 865 F 57.750 pounds 17. 1.BBA SEM VI = (8.300 direct labor hours @ Rs. Rs. 4.875 U d.700 . Rs.890 U Study Material: Management Accounting 54. 2. 2. 2. Refer to McCoy Company.000 hr used = Rs. 3.Rs.90 . Rs.480 U b. 2. 865 F c.040 U Prepared By: Mahendra Patel. Rs.20 per hour 56. 938 U (rounded) McCoy Company McCoy Company has the following information available for October when 3.20 . What is the labor efficiency variance? a. 4. Rs. 1. What is the labor rate variance? a.25 Material used 11.480 F c. 865 U d. What is the labor efficiency variance? a. Refer to Marley Company. 2.800 F ANS: C Labor Rate Variance = (AP . Rs.0 hours per unit @ Rs. 1. What is the labor rate variance? a.300 pounds @ Rs.125 U ANS: B Labor Efficiency Variance = (AQ . 3. = Rs. Rs.050 U c.750 * 3)) * Rs.500 units were produced (round answers to the nearest Rupee).875 U b. Rs.50 per pound 5.800 U 55. Faculty.17 - .25 per hour Actual: Material purchased 12. 2. Rs.20 = Rs.SQ) * SP = (7. 10. 875 F b. 7. 10. Rs. Refer to Marley Company.SP) * AQ = (Rs. Standards: Material Labor 3. Refer to McCoy Company.Rs. 7.800 U d.750 units)) * Rs. 10. Rs. Rs. 875 U ANS: B Labor Rate Variance = (AP . 10.050 F b.50 = Rs. Rs.25) * 17.SP) * AQ = (Rs.(2.(2. Rs.000 hr . 938 U c.5 pounds per unit @ Rs.50) * 7. 1.

4. 5.250 U c. 49. Refer to McCoy Company. 2.25) .80 per pound 3 direct labor hours per unit @ Rs.00 per hour 4.SQ)* SP =(17. Rs. Rs. Rs.500 units * 3.65 per pound 6.25 = Rs.25 .125.250 pounds purchased and used @ Rs.750 * Rs. 5188 F Scott Manufacturing The following March information is available for Scott Manufacturing Company when it produced 2.750 .075 F ANS: D Material price variance = (AP . Rs.100 units: Standard: Material Labor Actual: Material Labor 2 pounds per unit @ Rs. 10.SQ) * SP = (11.50) = Rs. Rs.500 * 3.5 hr/unit)) * Rs.250 F 60. 2.300 hrs -(3. 2. Rs. Faculty. What is the material price variance (based on quantity purchased)? a.075 U b.300 = Rs. What is the material quantity variance? a.(3.Rs. Refer to McCoy Company. 5. 2.SP) * AQ = (Rs. Parul Institute of Business Administration .075 F 59. Rs. 5.0 hr/unit)) * Rs. 4.Rs.75 per hour Prepared By: Mahendra Patel.500 units * 5. 2. What is the total material variance? a. 4. 3.937.250 F b.938 F d.850 F ANS: C Total Variance = (11.040 F Study Material: Management Accounting ANS: A Labor efficiency variance = (AQ . Refer to McCoy Company. 225 F d. 2. 55.188 F d.00 . Assume that the company computes the material price variance on the basis of material issued to production. 2. 3.5 * Rs. 9.475 U ANS: A Material quantity variance = (AQ .050 F 58. Rs. Rs.25/hr = Rs.18 - . Rs.(3. 5.850 U b. 2.00 = Rs. Rs.188 U c. 2. Rs. 4. 3. Rs.BBA SEM VI d.300 direct labor hours at Rs. 4. 10. 2.938 U c.50) * 12.

Rs.875 Prepared By: Mahendra Patel. Rs. Rs. Rs.100 units * 3 hrs/unit) * Rs. 731. Rs.BBA SEM VI Study Material: Management Accounting 61. 0 Forrest Company Forrest Company uses a standard cost system for its production process and applies overhead based on direct labor hours. 10. Faculty.(2.575 F 64. 275 F b. 1.10 Rs. What is the labor rate variance? a. 5.Rs. Rs.SP) * AQ = (Rs. 0 ANS: B Labor Rate Variance = (AP .100 units))* Rs. Rs.19 - . The following information is available for August when Forrest made 4.75 Rs.575 U b. What is the material quantity variance? a. 731.65 .80/unit = Rs.SQ) * SP = (6. Rs. Rs. Rs.250 lbs = Rs. Refer to Scott Manufacturing. What is the material price variance? a. What is the labor efficiency variance? a. 1.00) * 6.00 U d. Parul Institute of Business Administration . 637. 290 U 63.(2 lbs/unit * 2. 21. 630. Rs.75 .250 . 637. 3.25 U c.00 = Rs.500 units: Standard: DLH per unit Variable overhead per DLH Fixed overhead per DLH Budgeted variable overhead 2.50 F 62. none of the answers are correct ANS: D Labor efficiency variance = (AQ . 637. 5.300 .50 F c. Refer to Scott Manufacturing.300 hrs = Rs.SQ) * SP = (4. 1. 290 F c.00 F ANS: B Material price variance = (AP . Refer to Scott Manufacturing. Rs.Rs. 9. 275 U ANS: C Material quantity variance = (AQ .50 Rs. Rs.50 U b.SP) * AQ =(Rs. Rs.00 F d. Refer to Scott Manufacturing. 1.594 U d.575 F c.80) * 4.25 F b. Rs. 5. 1. 10. 750. 630. 290 U d.

Refer to Forrest Company. ((4.75) + Rs.00 F d. what is the spending variance? a. Rs. 3.Rs. what is the controllable variance? a. 5.00 U d.50 . 6.00 F b. 38.50 U b.875. what is the non-controllable variance? a.250) = Rs.Budgeted Overhead Based on Standard Quantity = Rs. 5.00 U 68.812.562. Rs. Rs. 64.625 F c. 15. Faculty.Rs.00 U c.000.00 F ANS: A Controllable Variance = Actual Overhead . Rs.75) + 38.437. what is the total overhead variance? a.000 hrs * Rs. 4.50) = Rs.50) = Rs.20 - . Rs.250 . 9.562.500 units * 2.10) * 2. Refer to Forrest Company. Rs.56.00 . 3.750) = Rs.000 65.875. Rs. (1.5 DLH/unit * Rs.50 F c.500 units) = Rs.Applied Overhead = Rs.50U 66. 3.Applied Overhead = Rs.(Rs.00 U c.250. Rs. 3.875.375 U b.50 U b.54.250 . 4.50 U d. 38.250 + 38. Using the one-variance approach. 6. 3. Using the three-variance approach.750 10.75 + 3.437. Rs. 3.50 hrs/unit * 4. 64. 8.062.250 . (26. Using the two-variance approach. 1.687. 5.375.Budgeted OH based upon Inputs Used = Rs.50 U ANS: C Total Variance = Actual Overhead . Rs. 4.000 U d. Rs. 26.625. 9.250.375. 1.812. Rs.BBA SEM VI Budgeted fixed overhead Actual: Direct labor hours Variable overhead Fixed overhead Study Material: Management Accounting Rs.Rs.687. Refer to Forrest Company. (58. (64. 6.00 U Prepared By: Mahendra Patel. 58. Rs.00 . Rs.000 Rs. Rs. Parul Institute of Business Administration . Using the two-variance approach.((10.125.50 = Rs.50 U 67.750 U ANS: C OH Spending Variance = Actual OH .062.000) . Rs.250 Rs.50 U ANS: B Uncontrollable Variance = Budgeted Overhead Based on SQ .750) = Rs. 8. 38. 64. Refer to Forrest Company.462. 54. (64.812.

50 U Rs.50 U b.062.50 * Rs. 750 U d. 2. Using the three-variance approach.937.687.187. what is the fixed overhead spending variance? a. Rs.54. Rs. 2.00 F c. 1.937.750.750. 4. 2. d.250.750) .000 * Rs. 3. 2. 1.562.(10. 2. Rs.58.750) = Rs.17.000 * Rs.75/hr) . 2.500.187. Rs. 38.((4.50 . 1.50hrs/unit * Rs. 26. 2.937. 8. Using the three-variance approach. 6. Faculty.187. Rs. what is the variable overhead spending variance? a.375. Using the four-variance approach.250.500. 3.50 F ANS: C VOH Efficiency Variance = Budgeted VOH based on Actual . what is the efficiency variance? a. (26.((4. 3.375.75)+ Rs.75/hr)) = Rs.875. b.187.187. 8.000 U b.187. Rs. Using the four-variance approach.875.50 F Rs. 38. what is the volume variance? a. (17.000 * Rs.Budgeted VOH/Actual Quantity = Rs.00) = Rs.BBA SEM VI Study Material: Management Accounting 69. Rs. Rs.19.75) + Rs. Refer to Forrest Company.00 F c.125. 4.50 U ANS: C Variable Overhead Spending Variance = Actual VOH . Rs. 3.50 F 70. c. 1. 9.562. Refer to Forrest Company. what is the variable overhead efficiency variance? a.250.00 U d.00 U d.50 F 73.Budgeted VOH/Standard Qty = ((10. 2.50 F Rs. Rs. Rs.00 . (56.50 F c. Rs.00 F b.500 * 2.50 U ANS: C Volume Variance = Budget Based on Standard Quantity . Rs.00) = Rs.50) = Rs.437. 7.75/VOH hr) = Rs. 6. Parul Institute of Business Administration . Rs. Rs.875. Using the four-variance approach.50) = Rs. Rs. 9. Refer to Forrest Company. Refer to Forrest Company. 3.00 .00 U 71.00 . Refer to Forrest Company.437. Rs.00 U 72.21 - .Budgeted OH based on Standard = ((10.937. (58.125 F c.500 * 2.00 U b.50 F ANS: B OH Efficiency Variance = Budgeted OH based on Actual .50 F d.Overhead Applied = Rs. 1.00 . 750 F Prepared By: Mahendra Patel.

570 U c. 7.950 Rs. Rs.750) = Rs.50 .950 U b.54.975 U d. Refer to Rainbow Company Using the four-variance approach.300 75. what is the volume variance? a. Rs.875.125 F b.20 DLH/unit * Rs.400 8. 3. what is the variable overhead efficiency variance? a. The following information is available for July: Standard: Direct labor hours per unit Variable overhead per hour Fixed overhead per hour (based on 11. 42.22. 750 F 74. 10.800 DLH * Rs.00 U Rainbow Company Rainbow Company uses a standard cost system for its production process.Applied Fixed OH = Rs. 2. Using the four-variance approach.950 . Rs.200) Prepared By: Mahendra Patel. 7.000 . 2.590 U ANS: A Variable OH Spending Variance = Actual VOH . 2.200 F d.875 F c.875 U ANS: D Volume Variance = Budget Based on Standard Quantity .50/DLH) . 2.000 . Rs. 2. (38. Refer to Rainbow Company Using the four-variance approach. Rs.00) = Rs.200 U ANS: C VOH Efficiency Variance = Budgeted OH/Actual .562. 6. 3.990 DLHs) Actual: Units produced Direct labor hours Variable overhead Fixed overhead 2. 3. (29.BBA SEM VI Study Material: Management Accounting ANS: D Fixed OH Spending Variance = Actual Fixed OH .437.(4400 units*2.50) = Rs. 7. Rainbow Company applies overhead based on direct labor hours.Overhead Applied = Rs. 3. Rs. Rs. 29.800 Rs.22 - .38.50 Rs. Rs. Parul Institute of Business Administration .00 4. Rs.Budgeted VOH/Actual = Rs. what is the variable overhead spending variance? a. 9.000) = Rs. 3. Rs.063 U d. 25 F c.950 76. 9. Rs. Refer to Forrest Company.Budgeted OH/Standard = (8.24. (58. (22. Faculty.20 Rs. Rs.570 F b.

50/hr*2. what is the volume variance? a. Rs.Standard Fixed OH = Rs.50/hr) + Rs.250 . Faculty. 2. Refer to Rainbow Company Using the three-variance approach.970) = Rs. 35. 6.23 - . 5.(11. 2. 35.60.Rs. Rs. Refer to Rainbow Company Using the three-variance approach.970).170) = Rs. Refer to Rainbow Company Using the four-variance approach.400 units * Rs.775 U ANS: B Efficiency Variance = Budget OH/Actual Use . Rs. (72.240 = Rs.Standard Overhead Applied =( 4.900 U b. 23. 13. Rs.57. 2.20 DLH/unit) = Rs. Refer to Rainbow Company Using the four-variance approach. Rs. 2. Rs.00/DLH) = Rs. Refer to Rainbow Company Using the three-variance approach. Rs.200 F c. (42.170 .280 F d. 13. 2. 14. 5.300 .200 F Study Material: Management Accounting 77.970) = Rs. Rs.850 U b. 11.Budgeted OH/Standard Quantity Standard Overhead Applied = ((8.330 U 78. 2. what is the efficiency variance? a. Parul Institute of Business Administration . 72. 2.970) = Rs.50/hr*2. Rs.260 U c.970)-( 4.930 U b.850 F c. Rs. 35. 6.20 hrs/unit + Rs. 14. what is the fixed overhead spending variance? a.Budget OH/Actual Use = Rs. 60. 6.50/hr) + Rs.200 F 81.(4. 35.35. Rs. 15. Rs. 42. 6. (57. 935 F ANS: B Fixed OH Spending Variance = Actual OH .970) = Rs. 2.930 U d.50/hr*2.930 U 79.20 hrs/unit + Rs.BBA SEM VI = Rs. Rs.400 units * Rs.800 hrs * Rs. 6.640 F ANS: A Volume Variance = Budgeted OH/Standard Quantity .400 units*Rs.250 . 0 d. 14. 2.770 F b. Rs. 53. 3.990 DLH’s * Rs.280 U ANS: D Spending Variance = Actual Overhead . Rs. Rs. what is the spending variance? a.260 U b.800 hrs * Rs. what is the volume variance? a.300 .((8. Rs. 23.975 U d. Rs.280 U 80.330 U c.640 F Prepared By: Mahendra Patel.970 . 7.

6. 5.170 .000.300 (12.( 4. Rs.24 - . Rs. 34. 34. (72. Refer to Rainbow Company Using the two-variance approach.20 *(Rs.170 . 4. Rs.305 U c. 12. 53. 2.20 hrs/unit + Rs.500.50/hr*2. b. Not determinable without knowing the actual number of units produced.60.080 U ANS: D Controllable Variance = Actual Overhead .Rs.Standard Overhead Applied =( 4. 5. 3.010 U b.930 U 84. what is the controllable variance? a. 35.930 U 82.500 standard hours were allowed for actual production. Rs. If 11. 16.Rs. what is the total variance? a. 19.00 per machine hour was set. d.50/hr*2.400 units * Rs. Rs.250.(4.20 hrs/unit + Rs.Standard Overhead Applied =( 4. 35. Rs.040 F b. Rs.000 when the predetermined rate of Rs. 60.930 U d.400 units * Rs.080 U 83. 34. 12.240 = Rs.50/hr*2. 0 c. 53.20 DLH/unit) = Rs.240 =Rs.730 U ANS: A Total Variance = Actual Overhead .(4. 72.250.650 U b. 35. 72.Applied Overhead =Rs. 26.(4. 6.Budgeted Overhead Based on Standard Quantity = Rs. 3. Parul Institute of Business Administration .970). Rs. 2. applied fixed overhead is a. 13. 6. 33. 21. Prepared By: Mahendra Patel.400 units*Rs.BBA SEM VI c. 53.775 U d.400 units*Rs. Refer to Rainbow Company Using the one-variance approach. Rs. 2.300.00 . Rs.260 U ANS: C No controllable Variance = Budgeted OH/Standard Quantity .Rs.250 .50 + Rs. Rs.240 = Rs. 33. Rs.705 U d. what is the non-controllable variance? a. Rs.970).50/hr*2. Actual fixed overhead is Rs.400 * 2. 60. 72.000 machine hours) and fixed overhead was estimated at Rs. Rs. Rs. Rs. 6.010 U 85.930 U d. 19.480 U c.50/hr*2.170) = Rs.00)) =Rs. c. 0 Study Material: Management Accounting ANS: C Volume Variance = Budgeted OH/Standard Quantity . Refer to Rainbow Company Using the two-variance approach. 6.20 hrs/unit + Rs. Rs.250 .970) = Rs.400 units * Rs. Faculty. 2. 12. 5.20 DLH/unit) = Rs.

000 21. 5. Rs. Rs.BBA SEM VI ANS: C 11. 3. 5. 1. Rs. 660 d.000 F d. = Rs.500 39.500 U ANS: A Prepared By: Mahendra Patel.000 Rs. Rs. 34.75. Rs.000 Rs.000 Rs.000 DL hrs * Rs. 48.000. 1 Rs.25 and standard fixed overhead per unit is Rs.000 39. c. what is the controllable variance for January? a. 147.000 F b. 4 40. 9.00/hr.25 - . Rs.25 + Rs. 1. 990 87.980 c.000 Rs. 197. 199.500 Study Material: Management Accounting 86. * Rs. One unit requires 2 direct labor hours to produce. what total amount of overhead is applied to the units produced? a.000 F c. Rs. Rs. ANS: A 39.000 Rs. Rs. cannot be determined without knowing the actual hours worked ANS: A 330 units * (Rs.75) = Rs.500. Faculty. d. 10. Western Company uses a standard cost accounting system. 1.500 hrs. 990 b. Paramount Company uses a standard cost system and prepared the following budget at normal capacity for January: Direct labor hours Variable OH Fixed OH Total OH per DLH Actual data for January were as follows: Direct labor hours worked Total OH Standard DLHs allowed for capacity attained 24.000 88.50 22. 6. Rs. b. 197. If 330 units were produced this month. Parul Institute of Business Administration . The following overhead costs and production data are available for August: Standard fixed OH rate per DLH Standard variable OH rate per DLH Budgeted monthly DLHs Actual DLHs worked Standard DLHs allowed for actual production Overall OH variance-favorable The total applied manufacturing overhead for August should be a. 3.000 Rs.500.000.00/hr = Rs. 108. 2.000 Using the two-way analysis of overhead variances. 195. 195. 1. Standard variable overhead per unit is Rs. Rs. 1.

000) = Rs.((3. Rs. 4 Rs.000 Rs. (147. 2. 750 F 90.000 * Rs.000 F. Rs. 750 F b. Rs.000 U. budgeted Actual hours Standard hours Variable OH rate per DLH Rs. 147. 3 3.500 * Rs.000 F 91.000 . Rs.((21. 2.000) = Rs.000 .000) = Rs.000 32. Selected data for the April production activity are as follows: Actual variable OH incurred Variable OH rate per MH Standard MHs allowed Actual MHs Rs. Hangman Company uses a two-way analysis of overhead variances. Faculty. 2.50) + Rs. The following information is available from the Fitzgerald Company: Actual OH Fixed OH expenses.000 . 12. 6/hr) = Rs. 3.000 Rs.200 F Rs.Budgeted OH based on Standard Qty = Rs. 196. what is the overhead spending variance? a.200 Rs. Parul Institute of Business Administration .500 Prepared By: Mahendra Patel.26 - .150.000 3.600 Rs.000 F.300 Rs.500 3.BBA SEM VI Study Material: Management Accounting Controllable Variance = Actual Overhead . c. 1.000 . 196. 4.000 Assuming that budgeted fixed overhead costs are equal to actual fixed costs.50 Assuming that Fitzgerald uses a three-way analysis of overhead variances. 7. Rs.500 U ANS: A Spending Variance = Actual Overhead . 7. 15.000 F 89. 7.00/hr) + Rs.15. 4. 950 F d. (15. actual Fixed OH expenses. d. 6. Rs.Budget Based on SQ for Actual Output = Rs.800 Rs. Overhead cost information for October is as follows: Total actual overhead incurred Fixed overhead budgeted Total standard overhead rate per MH Variable overhead rate per MH Standard MHs allowed for actual production What is the total overhead variance? a. Oxygen Company uses a standard cost system.000 . 2. ANS: A Controllable Variance = Actual OH .(33.000 F. Rs. 108. 3. 6 33. the controllable variance for April is a. Rs. 2. 750 U c.750) = Rs. 15.000 * Rs.Budgeted Overhead/Actual Hours = Rs. 1. b. Rs.

The variable overhead efficiency variance for April was a.000) = Rs. d. 40.Refer to Uniform Company.000 U. Faculty. Rs. Parul Institute of Business Administration . 1. 1. d. Refer to Uniform Company.000 F.000 machine hours as follows: Standard costs per unit: Variable portion Fixed portion 2 hours @ Rs. Rs.400 U Study Material: Management Accounting ANS: C Total Overhead Variance = Actual Overhead . All inventories are carried at standard cost.000 variable plus Rs. c.Standard Overhead = Rs. Rs. c.400 F Uniform Company Uniform Company has developed standard overhead costs based on a capacity of 180. 38. Rs. 60. 85. 3) = Rs. Rs. b.000 U.000 U.27 - . (12. 38.(165.400 F d.000 (Rs. 40. Rs. d. Rs.BBA SEM VI b. 1.000 .600 .(80. 518. 60. Actual overhead incurred totaled Rs. Rs. 518. Rs.480.495.000 U 93. 3 = 2 hours @ Rs.000 . 38.(3. 4/MH)) = Rs.000 U. Refer to Uniform Company. b. ANS: A Variable OH Efficiency Variance = Budgeted VOH/Actual . The variable overhead spending variance for April was a. ANS: B Variable OH Spending Variance = Actual VOH .000 U.000.000 units * 2 hrs/unit * Rs. 23.500 MH * Rs. 15. 5 = Rs. c.200 U c.000 .000) = Rs.378. 3/hr) = Rs.000 U.Budgeted VOH/Standard = Rs. The following data relate to April: Actual machine hours used were 165.600 .000 F. Rs. Rs. (12. 23.000 F.000 DLH * Rs. Rs.000 U.000 fixed).000 units were scheduled for production. but only 80. b. Prepared By: Mahendra Patel. 38. 16 During April. The fixed overhead spending variance for April was a.000 U 94. 860. 92. 1. Rs.Budgeted FOH/Actual Input = Rs.14. (495.000 U.000 . Rs.000 units were actually produced.000) = Rs. 1. (518. 6 10 Rs. 15. Rs.000 F. 495. 15. 23.

100.800.000) = Rs.25 per gallon Material B: 24. Rs.363) = Rs.716 gallons purchased and used @ Rs. Refer to Ultra Shine Company. Rs. Rs. 96.000 U. 5/hr) = Rs. Rs. Rs. Rs.000 F.000 U. c. The company employs both skilled and unskilled workers. What is the total material price variance? a. 4.000 U Ultra Shine Company Ultra Shine Company manufactures a cleaning solvent.950 @ Rs. 7 per hour Actual: Material A: 10.Rs.28 - . 3. Faculty. 100.00 per gallon Skilled Labor: 4 hours @ Rs. b.Applied FOH = Rs.Quantity. 1.596 U c. Refer to Uniform Company. 877 F b.864 F Prepared By: Mahendra Patel. 3. 40.Budgeted Fixed OH = Rs. Rs. Rs. 60.484 gallons purchased and used @ Rs.Actual Mix. 100. Round all answers to the nearest whole Rupee. 931 U 97.(180.75 gallons @ Rs. d.294 .000 .48. What is the total material mix variance? a.BBA SEM VI Study Material: Management Accounting ANS: B Fixed Overhead Spending Variance = Actual Fixed OH .000) = Rs.596 F b.15 per hour During the current month Ultra Shine Company manufactured 500 55-gallon drums.90 per hour Unskilled labor hours: 1. 2. ANS: D Fixed FOH Volume Variance = Budgeted Fixed FOH . 60.000 F 95.50 per gallon Material B: 17.Price . 931 F ANS: C Total Material Price Variance = Actual Mix. Parul Institute of Business Administration . 931 U d.300 @ Rs. 900.000 F. (900. Rs. (860. (49.000 MH * Rs. The fixed overhead volume variance for April was a. (860.25 gallons @ Rs. 7.Qty.000 . 1. Rs.Refer to Ultra Shine Company.000 . 12 per hour Unskilled Labor: 2 hours @ Rs. To produce one 55-gallon drum of solvent requires Materials A and B as well as skilled labor and unskilled labor. The standard and actual material and labor information is presented below: Standard: Material A: 30. Rs. 1.90 per gallon Skilled labor hours: 1. 877 U c. 11.Std Price = Rs.

Price = Rs.Rs.Rs. 1. Rs.44. What is the labor rate variance? a. What is the labor mix variance? a.596 U 98. Price = Rs.083 U c. Qty.111 F c. 0 b. Rs.864 U Study Material: Management Accounting ANS: B Total Material Mix Variance = Actual Mix.588 F ANS: C Labor Mix Variance = Actual Mix.767 .Actual Qty = Rs.29 - . c.583 .Qty.111 U b. Std Price . Std Price . 2. 1. Refer to Ultra Shine Company. 0 100. 2.BBA SEM VI d. 1. Actual Qty. Rs. 2. Faculty. Prepared By: Mahendra Patel.083 F ANS: A Labor Rate Variance = Actual Mix.500) = Rs. 1. 1. Rs. Rs. 2.083 U b. Rs. 1. 2. Rs.Std Mix.583 U 102. d.Price . None of the above. 4. Std Price.000) = Rs.583 U d.670 F ANS: A Material Yield Variance = Std Mix.583) = Rs. Qty.138 U ANS: A Labor Yield Variance = Std Mix.656) = Rs.Std Mix. 1. 1. Refer to Ultra Shine Company. Refer to Ultra Shine Company.Std Mix.138 F d. What is the labor yield variance? a.083 F d. 31. Parul Institute of Business Administration . Act Qty. Rs. The sum of the material mix and material yield variances equals a. 1. Rs. Rs.767) = Rs. 2. (32.Std Mix.111 U 99. 3. The total material variance. Qty.Actual Qty .500 . 2.Qty.Qty.32.500 . (44. Rs. The material purchase price variance. Rs. (48. b.Std Price = Rs. 43. Rs. Rs.583 U b. Std Price .363 .588 U c. The material quantity variance. Rs.33. What is the total material yield variance? a. 1.Actual Mix.083 F 101. 2. Rs. Price. (33. (32.583 F c. Rs.670 U d. Std Price = Rs. Refer to Ultra Shine Company.

d. ANS: Prepared By: Mahendra Patel. The labor efficiency variance compares the number of hours actually worked with the standard hours allowed for the production achieved and values this difference at the standard labor rate. Practical standards can be reached or exceeded most of the time with reasonable effort. (b) An operations flow document contains an identification number. Parul Institute of Business Administration . the departments doing the work. material price variance. The sum of the labor mix and labor yield variances equals a. 2. The labor efficiency variance. This standard allows for normal. and standard number of hours and/or minutes to perform each task. A total variance is the difference between actual input cost for material or labor and the standard cost for material or labor for the output produced.30 - . ANS: A SHORT ANSWER 1. Faculty. Discuss briefly the type of information contained on (a) a bill of materials and (b) an operations flow document. b. The labor rate variance. 3. ANS: A standard cost system records both standard costs and actual costs in the accounting records.BBA SEM VI ANS: B Study Material: Management Accounting 103. ANS: Expected standards reflect what is actually expected to occur in the future period. List and discuss briefly the three standards of attainability. and the quantity of each material required for a product. descriptions of the tasks to be performed. total variance. The total labor variance. c. Discuss how establishing standards benefits the following management functions: performance evaluation and decision making. unavoidable time problems or delays. This standard takes into consideration waste and inefficiencies and makes allowances for them. Nothing because these two variances cannot be added since they use different costs. This standard does not allow for normal operating delays or human limitations. 4. Ideal standards provide for no inefficiencies of any type. This process allows for better cost control because actual costs can be easily compared to standard costs. a description of components. Define the following terms: standard cost system. and labor efficiency variance. The material price variance is the difference between the actual price paid for material and the standard price of the material times the actual quantity used or purchased. ANS: (a) A bill of materials contains the identification of components.

6. Any level of activity within the relevant range may be selected since VOH cost per unit is constant throughout the relevant range. and determining contributions made by various product lines. f. c. b. cost estimates for jobs. availability of materials. Discuss how variable and fixed overhead application rates are calculated. g. Standards should be reviewed periodically to assure management that current standards are being established and used. quality of materials. these levels are not controllable by the production manager.BBA SEM VI Study Material: Management Accounting Performance evaluation is enhanced by the use of standard costs because it allows management to pinpoint deviations from standard costs and points out variances. Production is more often related to ability to sell and demand. The availability of standard cost information facilitates many decisions. If actual activity differs at all from this selected base. in part. a cost that fluctuates with large changes in level of activity a range of activity over which costs behave as predicted the capacity level at which a firm believes it will operate at during the coming production cycle the difference between actual variable overhead and budgeted variable overhead based on inputs the difference between total actual overhead and total applied overhead the difference between total budgeted overhead based on inputs and applied overhead the difference between total actual overhead and total budgeted overhead based on output the difference between actual fixed overhead and budgeted fixed overhead ANS: Prepared By: Mahendra Patel. the FOH spending variance can be considered. Faculty. 8. ANS: Standards may need to be changed from time to time because of changing economic conditions. thus. d. the volume variance arises solely because management has selected a specific level of activity on which to calculate the FOH application rate. Production levels are controllable to a very limited extent in the production area. These costs can be used in budgeting. can be used to decide whether to add new lines or drop old lines. and labor rates or skill levels. 7. Provide the correct term for each of the following definitions: a. Why are fixed overhead variances considered non-controllable? ANS: Management has limited ability to control fixed overhead costs in the short run because these costs are incurred to provide the capacity to produce. The variances are analyzed and individual responsibility can be assessed for the variances. h. depending on the nature of the causes. The fixed overhead application rate is calculated by dividing total budgeted fixed overhead by the specific capacity level expected for the period. therefore. On the other hand. Fixed costs can be controllable to a limited extent at the point of commitment. 5. thus. a volume variance will occur. controllable.31 - . e. ANS: The variable overhead application rate is calculated by dividing total budgeted variable overhead by its related level of activity. Discuss why standards may need to be changed after they have been in effect for some period of time. and. Parul Institute of Business Administration .

step fixed cost relevant range expected annual capacity variable overhead spending variance total overhead variance volume variance efficiency variance fixed overhead spending variance Study Material: Management Accounting Prepared By: Mahendra Patel.BBA SEM VI a. Faculty. c.32 - . d. Parul Institute of Business Administration . e. f. h. g. b.

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