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BALIUAG UNIVERSITY

CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________

STANDARD COST AND VARIANCE ANALYSIS
THEORY
1. How is labor rate variance computed?
a. The difference between standard and actual rate multiplied by actual hours
b. The difference between standard and actual rate multiplied by standard hours
c. The difference between standard and actual hours multiplied by actual rate
d. The difference between standard and actual hours multiplied by the difference between standard and actual
rate
2. A company uses a two-way analysis for overhead variances – budget (controllable) and volume (capacity). Te volume
variance is based on the
a. Total overhead application rate
b. Volume of total expenses at various activity
c. Variable overhead application rate
d. Fixed overhead application rate
3. Listed below are four names for different of standard associated with a standard cost system. Which of these
describes the labor costs that should be incurred under he forthcoming efficient operating conditions?
a. Ideal
b. Basic
c. Maximum-efficiency
d. Currently attainable
4. A debit balance in the labor efficiency variance indicates that
a. Standard hours exceed actual hours
b. Actual hours exceed standard hours
c. Standard rate and standard hours exceed actual rate and actual hours
d. Actual rate and actual hours exceed standard rate and standard hours
5. When performing input-output variance analysis in standard costing, “ standard hours allowed” is a means of
measuring
a. Standard output at standard hours
b. Actual output at standard hours
c. Standard output at actual hours
d. Actual output at actual hours
6. If the total material variance (actual cost of materials used compared with the standard costs of the standard
amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to
price and usage?
a. There is no need to further evaluate the total materials if it is favorable
b. GAAP require that all variances by analyzed in three stages
c. All variances must appear in the annual report to equity (owner’s) for proper disclosure
d. To allow management to evaluate the efficiency of the purchasing and production functions
7. When computing variances from standard cost, the difference between actual and standard price multiplied by
actual quantity yields a
a. Combined price quantity variance
b. Price variance
c. Volume variance
d. Mix variance
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Intelligence without ambition is a bird without wings. – Salvador Dali

Standard cost are estimates of cost attainable only under the most ideal conditions. Fixed costs d. When material is purchased c. and cost of goods sold. What is the normal year-end treatment of immaterial variances recognize in a cost accounting system utilizing standards a. When material is issued b. How should a usage variance that is significant in amount be treated at the end of an accounting period? a. Which of the following is true concerning standard cost? a. Unfavorable Favorable c. Reclassified to differed charges until all related production is sold b. If a company follows the practice of isolating variances at the earliest point in time. standards can help motivate employees d. When purchase order is originated 12. Allocated among cost of goods manufactured and ending work in process inventory c. If properly used. finished goods inventory. what would be the appropriate time to isolate and recognize a direct material price variance? a. – Salvador Dali . Reported as a differed charge or credit b. b. Charged or credited to a cost of goods manufactured d. Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable efficiency variance? a. what cost attendant to an element of production (materials. labor or overhead) are used in order to compute variances from standard amounts? a. Total costs b. When using full absorption costing. Allocated among work in process inventory. Favorable Unfavorable b. Defective materials caused more labor to produce a standard unit 10. material in amount. Controllable costs 9. but large favorable variances need not be investigated ________________________________________________________________________________________ Page 2 of 10 Intelligence without ambition is a bird without wings. The mix or workers assigned to be particular job was heavily weighted towards the use of new relatively low pad unskilled workers c. Standard cost are difficult to use with a process costing system c. but rarely practicable b. Capitalized as a cost of ending finished goods inventory 14. Closed to cost of goods sold in the period in which they arose d. When material is used in production d. should be investigated. The mixed worker assigned to the particular job was heavily weighted towards the use of higher paid experienced individuals. Unfavorable Unfavorable 11. Unfavorable variances. Allocated among cost of goods manufactured. 13.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ 8. Variable c. Because of the production schedule workers from other production areas were assigned to assist particular process d. Favorable favorable d. What type of direct material variances for price and usage will arise if the actual number of pounds of materials used exceeds standard pound allowed but actual cost was less than standard costs? Usage Price Usage Price a. finished goods inventory and cost of goods sold c.

Labor efficiency d. if at all are equivalent units involved or used in the cost report at standard? a. Eliminate the need of subjective decisions by management d. Quantity c. To eliminate having an account for under-applied or over-applied factory overhead at the end of the period 18. The actual hours allowed for the units produced were greater than actual direct labor hours used c. Determine “break-even” production level b. Allocate costs with more accuracy ________________________________________________________________________________________ Page 3 of 10 Intelligence without ambition is a bird without wings. What does a credit balance in a direct-labor efficiency variance account indicate? a. Labor rate 21. AH (AR-SR) d. Which of the following is one of the purposes of standard cost a. The actual equivalent units are multiplied by the standard cost per unit d. Control costs c. Given below are the following notations and their respective meanings AH – Actual Hours SHA – Standard hours allowed for actual production AR – Actual rate SR – Standard rate Which of the following formula represent the calculation of the labor-efficiency variance? a. When standard costs are used in a process costing system. SR (AH-SHA) b. how. SHA (AR-SR) 19. Efficiency variance d. Excess direct labor wages resulting from overtime premium will be disclosed in which type of variance a. Quantity variance 16. Volume b. Actual total direct-labor cost incurred were less than standard direct labor cost allowed for the unit produced d. Yield b. What standard cost variance represent the difference between actual factory overhead incurred and budgeted factory overhead based on actual hours worked a. To simplify costing procedures and expedite cost reports b. Which of the following is a purpose of standard costing? a. Equivalent units are computed using a “special” approach c. To replace budget and budgeting c. – Salvador Dali . The average wage rate paid to direct labor employees was less than the standard rate b. AR (AH-SHA) c.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ 15. The standard equivalent units are multiplied by actual cost per unit 20. To use them as a basis for product costing for external-reporting purposes d. Equivalent unit are not used b. The number of units produced was less than the number of units budgeted for the period 17. Spending variance c.

e. Width: 5 meters. Favorable labor usage (efficiency ) variance b. Direct labor efficiency variance. Standard labor cost per product. Variable d. Standard 24. the volume variance is the difference between the a. The actual factory overhead incurred totaled P54. Amount shown in the flexible budget and the amount shown in master budget b. Assume further that the company planned to produce 1. Less than anticipated levels of waste in the manufacturing process d. Which of the following cost allocation methods would be used to determine the lowest price that could be quoted for a special order that would utilize idle capacity within a production area a. Standard cost of labor for actual units produced. Unfavorable labor rate variance 25. Actual amount spent for overhead items during the period and the amount applied during the period.500 units of material. Materials quantity variance.000 are variable costs and P13.00 and 10 hours are needed to complete 1 box. In analyzing factory overhead variance. Materials (usage / purchase) price variance.50. Standard cost of materials per product. Favorable labor rate variance c. Direct labor rate variance.000 are fixed costs. – Salvador Dali . ½ inch think Hardiflex is needed to build the box and Boiser Blue Paint for finish painting. Process c. Job order b. 1. Budget allowance based on standard hours allowed for actual production for the period and the amount applied during the period d. ________________________________________________________________________________________ Page 4 of 10 Intelligence without ambition is a bird without wings. Master budget application rate and the flexible budget application rate multiplied by actual hours worked c.000 units were produced using 5.60. 23. Unfavorable labor usage (efficiency variance) d. h.000 for factory overhead costs. More than anticipated levels of waste in the manufacturing process PROBLEMS: 1. Each unit of material costs P50. Length: 5 meters.000 direct labor hours at P10.000 units of product for the month and budgeted P52. b. A Company wants to establish standard costs for the manufacture of its product called A+ Box with the following specifications: Height: 5 meters. An unfavorable price variance occurs because of a. Required: a. Standard cost of materials (used / purchased) for actual units produced. what type of variance will occur? a. If the actual hours worked exceed the standard hours allowed.555 units of materials at P50. Price decreases on raw materials c. f. c.25 per unit. Price increases on raw materials b.000 in which P39. The hourly labor rate is P10.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ 22. d. g. Actual time used in production totaled 7. Assume that during the month the company purchased 5.

000  Work in process.00 P1. – Salvador Dali .00 220. 2 – way factory overhead variances 3.way  3 – way  4 .750 hours  Factory overhead cost: 40.  Direct labor: 16 hours at P6.75 per hour. of the product using the following mix of materials: Materials M A E Actual Input (Kg. Total variance b. Equivalent units of production (FIFO) b.00 P10.50 Standard Cost P870. end: ¾ completed – 120 units  Units completed 440 Required: a.00 per unit. a batch was completed yielding 105 kgs. Proportion (%) 50 30 20 100 Std.) 60 30 30 120 Actual Prices (P/Kg.00 Required: a. Beauty Company manufactures hair care products in batches with a standard output of 100 kgs. Prices (P/Kg.00 345.00 per hour The company’s normal capacity is 500 units per month.) 55 33 22 110 Std.000 units at P11. Labor variances d. Yield Variance ________________________________________________________________________________________ Page 5 of 10 Intelligence without ambition is a bird without wings. j.00 Standard Cost P825.  Factory overhead:  Fixed: 16 hours at P2. beginning: 1/3 completed – 150 units  Started in process: 410 units  Work in process.) P15. Input (Kg.) P14. Meanwhile. FOH variance with flexible budget:  2.875.00 per hour  Variable: 16 hours at P3.way 2. Angel Company manufactures Tennis balls which they produce with the following standard costs:  Direct materials: 2 units of material at P12. the following actual costs were presented:  Materials purchased: 1. Materials variances c.00 P20.00 P11. Materials M A E Std. FOH variance with fixed budget.50 P22.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ i.00 At the end of the month.00 P1.00 660.90 per unit  Materials used: 980 units  Direct labor cost incurred: 7. Mix variance d.00 660. Price variance c.705.

P1. P2.000 Standard price per unit of direct materials P2. Information on Rex Co’s direct material cost for May is as follows” Actual quantity of direct materials purchased and used 30.100 Quantity purchased and used for actual production 2.000 lbs For the month of May.00.00 P1. P1.000 What was Material’s direct material price variance? a. what was Rex’s direct materials price variance? a.000 Standard quantity of direct materials allowed for May production 29.300 Standard unit price P6.000 unfavorable 8.050 favorable c.300 favorable 7. P2. at P5.500 1. – Salvador Dali . A company uses a standard cost system to account for its only product.200 unfavorable ________________________________________________________________________________________ Page 6 of 10 Intelligence without ambition is a bird without wings. Perkins Company.50 Standard quantity allowed for actual production 2. Actual cost of direct materials P84.000 lbs.020 favorable b. During March.10 6.10 Direct materials efficiency variance-favorable P3.400 1.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ 4.800 favorable b. P1. P1. P2. had 500 units of raw materials X in its inventory.000 Unfavorable direct materials usage variance P 3. Information of Material Company’s direct material cost is as follows: Actual units of direct materials used 20.000 favorable b.000 favorable 5. P1. P1.10 Operating data for April were as follows Material used Cost of materials used Number of finished unit produced 7.170 unfavorable d.000 The material usage variance for April was a.000 favorable d.000 unfavorable d. the following information pertains to raw material X for the month of June Actual number of units purchased Actual number of units used Standard number of units allowed for actual production Standard cost per unit Actual cost per unit 1.250 favorable c. P6.300 unfavorable d.800 lbs P40.800 unfavorable c. P6.300 P1. purchased in May P1. at June 1. P1.250 unfavorable b. Younger company’s direct material cost for the manufacture of product T were as follows: Actual unit purchase price P6. which has a standard cost system.950 2.000 Actual direct material costs P40.000 unfavorable c. P1.20 per unit and carried at a standard cost ofP1. P1. The materials standard per unit was 4 lbs. P2.25 Younger materials usage variance for March a. P1.

1.50 c. P3. P3.500 unfavorable c. The standard materials mix and related standard cost of each chemical used in a 500 liter batch are presented below ________________________________________________________________________________________ Page 7 of 10 Intelligence without ambition is a bird without wings.200 unfavorable b.000 favorable b.000 desk in march resulted in usage of 12. The usage variance resulting from the above production run was a. 183. Loss of output and efficiency may result of Gas Gain is P135. using 22. P1.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ 9.500 unfavorable 11.000 units raw materials at a total material cost of 100. P180. P10.000 favorable P4. A total cost of P25.06 b.25 each.000.200. A production run of 1. Buckler Company manufactures desks with vinyl tops.000 unfavorable P10.500 unfavorable Items 14 through 23 are based on the following information Energy Modification Company produces a gasoline additive. 1.45 d.00 based on 12 square feet of vinyl at a cost of P2.00 per square foot. gas Gain.50 a pound under term2/10. 1.000 favorable b.100 favorable c. 2. 176. The manufacturing process must provide for a 20% waste allowance.10 per unit.000 favorable P10. P3. requiring 45.000 units f material at a cost of P1.450 Materials purchased price variance-favorable P240 What was the actual purchase price per unit rounded to the nearest centavo? a. The direct material price variance ad usage variance were Price Usage a. P3.400 unfavorable d.75 d. – Salvador Dali . During April.00 b. Each finished unit of Product DX-25 contains 60 pounds of raw material.600 Standard quantity allowed for actual production 1.600 square feet of vinyl at a cost of P2.500 unfavorable P10.500 favorable d.150 favorable 13. 3. The standard material cost for the vinyl used per Model S desk is P27.20 per unit. Durable’s material price variance for April is a.60 Actual quantity purchased 1. and a total cost P 26. Durable installed roofs on 20 type R houses. P4. P1.000 units of output using 50. The standard material cost for a Type R house is P1. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.000 units of product. Throop Company had budgeted 50.75 12. P1. Actual output was 50.000 units of raw materials at a cost P2.800 favorable d.250 based on 1.40 e. Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. Information on Kennedy Company’s direct material cost is as follows: Standard unit price P3. The raw material can be purchased for P2. n/30.000 units at a cost P1.350 unfavorable c. None of these 10. The standard direct material cost for each unit of DX-25 is a.5 per square foot.400. P5.11 c. 187. The company takes all cash discounts. P5. Durable Company installs shingle roofs on houses.

840 2.500 85.800 7. P715 unfavorable c. What is the material usage variance for Echol? a. What is the purchase price variance of Protex? a. P715 unfavorable c.500 Total Purchase Price P5.365 6. P160 favorable d.50 37.000 13. P30 favorable 15.00 42.000 7. P476 unfavorable c. P30 favorable 17. P160 favorable d.300 Total cost P 40.000 40. P42 unfavorable b. P715 unfavorable c. P420 favorable d.420 14. – Salvador Dali . P715 unfavorable c. P160 favorable d. P42 favorable 19. What is the purchase price variance for Benz? a.140 84.00 The quantities of chemicals purchased and used during the current production period are shown in the schedule below. P365 unfavorable b.240 5.425 . What is the purchase price variance for Echol? a. P280 favorable d.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ Chemical Echol Protex Benz CT-40 Standard Input Quantity in Liters 200 100 250 50 600 Standard Cost per Liter P.150 . P365 unfavorable b.220 P19. P30 favorable 18. P365 unfavorable b. P280 unfavorable c.00 P135.880 13.600 12. A total of 140 batches of Gas Gain were manufactured usage variation at the end of each production period. What is the purchase price of variance for CT-40 a. P42 favorable ________________________________________________________________________________________ Page 8 of 10 Intelligence without ambition is a bird without wings.665 Quantity Used Liters 26. P420 unfavorable b.50 15. P365 unfavorable b. Chemical Echol Protex Benz CT-40 Quantity Purchased Liters 25. What is the materials usage variance for Protex? a. P160 favorable d. P30 favorable 16.200 .

500 The standard direct labor rate on January was a. What is the materials mix variance for this operation? a.50 unfavorable b. P6.000 favorable 25. What is the material usage variance for Benz? a. P94. P5.50 favorable d.75 d. P94.000 Total direct labor payroll P241. P8.200 What is Barber’s direct labor rate variance? a. P280 unfavorable b.500 Standard direct labor hours 35. P388. P476 unfavorable c.250 unfavorable b. P21.000 Direct labor rate variance-favorable P5. P21. Information n Barber company’s direct labor cost for the month of January is as follows Actual direct labor hours 34.00 c. What is he material usage variance for CT-40? a.05 26. P7.50 favorable d.50 unfavorable c.50 ________________________________________________________________________________________ Page 9 of 10 Intelligence without ambition is a bird without wings.95 b. P476 unfavorable c.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ 20. P890 favorable 23.50 unfavorable c. Information oh Hanley’s direct labor cost for the month of January is as follows Actual direct labor rate P7. P420 favorable d.000 unfavorable d. P5. P17.000 Actual direct labor hours 10. P294.00 c.50 unfavorable b. P8.50 b. P4.00 d. P890 favorable 24. Throps Co.500 Direct labor efficiency variance-favorable P 3. P42 favorable 22.’s records for April disclosed the following data relating to direct labor rate per hours is April was a. P420 favorable d. P280 unfavorable b.50 Standard direct labor ours allowed 11.700 unfavorable c. P4. – Salvador Dali . P294. What is the materials yield variance for this operation? a. P388. P20. P42 favorable 21.

Lion Company’s direct labor costs for the month of January were as follows: Actual direct labor hours 20.000 Direct labor rate variance-(unfav) P 3.BALIUAG UNIVERSITY CPA REVIEW 2014-15 MANAGEMENT ADVISORY SERVICES JACF __________________________________________________________________________________________________ 27.000 for P2. P1.000 unfavorable c.000 favorable d.000 favorable b. The direct labor efficiency variance was a. P2. Actual production was 900 units and direct labor cost was P19.300 favorable d. 2.450 favorable 28. P6. – Salvador Dali .150 favorable c.000 Total payroll P126.000 unfavorable END ________________________________________________________________________________________ Page 10 of 10 Intelligence without ambition is a bird without wings. The direct labor standards for producing a unit of a product are two hours at P10 per hour. Budgeted production was 1. P6.000 units. P6. P1.000 favorable b.000 What was Lion’s direct labor efficiency variance? a.000 direct labor hours. P6.000 Standard direct labor hours 21.