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# ATENEO DE MANILA UNIVERSITY VARIANCES (ODD SET)

JOHN GOKONGWEI – SCHOOL OF MANAGEMENT LONG TEST #2B [50 pts] – M.D. WONG
ACC101: COST ACCOUNTING AY 2017-2018 | 1ST SEMESTER

## NAME: ________________________________________________________________________ ID NUMBER: ________________________

GENERAL INSTRUCTIONS: This exam is to be answered in one blue book only. Solutions must be presented as neat as possible.

## Short Problems (1 point per answer)

1. The following data pertains to the direct materials cost for the month of October:

## What is the direct materials efficiency (quantity) variance?

2. The Landry Company has developed standards for labor. During June, 75 units were scheduled and 100 were produced.
Data related to labor are:

## What is the total direct labor cost variance?

4. Information for Nighttime Company's direct labor cost for February is as follows:

## What were the standard direct labor hours for February?

5. Arrow Industries employs a standard cost system in which direct materials inventory is carried at standard cost. Arrow has
established the following standards for the prime costs of one unit of product.

During November, Arrow purchased 160,000 pounds of direct materials at a total cost of \$304,000. The total factory
wages for November were \$42,000, 90% of which were for direct labor. Arrow manufactured 19,000 units of product
during November using 142,500 pounds of direct materials and 5,000 direct labor hours.

## a. What is the direct materials efficiency (quantity) variance for November?

b. What is the direct labor price (rate) variance for November?

6. The Redrock Company uses flexible budgeting for cost control. Redrock produced 10,800 units of product during October,
incurring indirect material costs of \$13,000. Its master budget for the reflected indirect material costs of \$180,000 at a
production volume of 144,000 units. What was the flexible budget variance for the indirect material costs in October?

7. Blue Company produces Trivets. Based on its master budget, the company should produce 1,000 Trivets each month,
working 2,500 direct labor hours. During May, only 900 Trivets were produced. The company worked 2,400 direct labor
hours. The standard hours allowed for May production would be?
ATENEO DE MANILA UNIVERSITY VARIANCES (ODD SET)
JOHN GOKONGWEI – SCHOOL OF MANAGEMENT LONG TEST #2B [50 pts] – M.D. WONG
ACC101: COST ACCOUNTING AY 2017-2018 | 1ST SEMESTER

8. The following information summarizes the standard cost for producing one metal tennis racket frame. In addition, the
variances for one month's production are given. Assume that all inventory accounts have zero balances at the beginning of
the month.

a. What were the actual direct labor hours worked during the month?
b. What was the actual price paid for the direct material during the month, assuming all materials purchased were put
into production?

## 9. Fill in the blanks:

10. Information on Barber Company's direct labor costs for the month of January is as follows:

## What is the production volume variance?

ATENEO DE MANILA UNIVERSITY VARIANCES (ODD SET)
JOHN GOKONGWEI – SCHOOL OF MANAGEMENT LONG TEST #2B [50 pts] – M.D. WONG
ACC101: COST ACCOUNTING AY 2017-2018 | 1ST SEMESTER

## What was Goodman's standard direct-labor rate?

13. Tub Company uses a standard cost system. The following information pertains to direct labor for product B for the month of
October:

What were the actual hours worked for the month of October?

## Long Problems (2 points per answer)

1. Dash Company adopted a standard cost system several years ago. The standard costs for the prime costs of its single
product are as follows:

The following operating data were taken from the records for November:

Required: (Be sure to indicate whether the variances are favorable or unfavorable.)

a. What is the actual kilograms of material used in the production process during November?
b. Assume the purchasing department is responsible for the material price variance, what is the actual price paid per
kilogram of material during November (assume no increase/decrease in inventory during the month)?

2. The XYZ Company uses a standard cost accounting system and estimates production for the year to be 60,000 units. At
this volume, the company's variable overhead costs are \$0.50 per direct labor hour.
The company's single product has a standard cost of \$30.00 per unit. Included in the \$30.00 is \$13.20 for direct materials
(3 yards) and \$12.00 of direct labor (2 hours). Production information for the month of March follows:

Required: (Be sure to indicate whether the variances are favorable or unfavorable.)

## a. Compute the direct material efficiency variance.

b. Compute the direct labor efficiency variance.
c. Compute the budgeted fixed costs for the month.
d. Compute the variable overhead efficiency variance.
e. Compute the production volume variance.
ATENEO DE MANILA UNIVERSITY VARIANCES (ODD SET)
JOHN GOKONGWEI – SCHOOL OF MANAGEMENT LONG TEST #2B [50 pts] – M.D. WONG
ACC101: COST ACCOUNTING AY 2017-2018 | 1ST SEMESTER

3. Eastern Company manufactures special electrical equipment and parts. Eastern employs a standard cost accounting system
with separate standards established for each product.
A special transformer is manufactured in the Transformer Department. Production volume is measured by direct labor
hours in this department and a flexible budget system is used to plan and control department overhead. Standard costs for
the special transformer are determined annually in September for the coming year. The standard cost of a transformer was
computed at \$67.00 as shown below.

Overhead rates were based upon normal and expected monthly capacity, both of which were 4,000 direct labor hours.
Practical capacity for this department is 5,000 direct labor hours per month. Variable overhead costs are expected to vary
with the number of direct labor hours actually used. During October, 800 transformers were produced. This was below
expectations because a work stoppage occurred at the copper supplier and shipments were delayed.
The following costs were incurred in October:

Required:
Compute each of the following variances, showing all your work. Be sure to indicate whether the variances are favorable or
unfavorable.

a. Direct material efficiency (quantity) variance for both iron and copper.
b. Direct labor efficiency variance.
ATENEO DE MANILA UNIVERSITY VARIANCES (ODD SET)
JOHN GOKONGWEI – SCHOOL OF MANAGEMENT LONG TEST #2B [50 pts] – M.D. WONG
ACC101: COST ACCOUNTING AY 2017-2018 | 1ST SEMESTER

4. Western Company manufactures special electrical equipment and parts. Western employs a standard cost accounting
system with separate standards established for each product.
A special transformer is manufactured in the Transformer Department. Production volume is measured by direct labor
hours in this department and a flexible budget system is used to plan and control department overhead. Standard costs for
the special transformer are determined annually in September for the coming year. The standard cost of a transformer was
computed at \$57.00 as shown below.

Overhead rates were based upon normal and expected monthly capacity, both of which were 4,000 direct labor hours.
Practical capacity for this department is 5,000 direct labor hours per month. Variable overhead costs are expected to vary
with the number of direct labor hours actually used.
During October, 900 transformers were produced. This was below expectations because a work stoppage occurred during
contract negotiations with the labor force. Once the contract was settled, the wage rate was increased to \$7.25/hour and
overtime was scheduled in an attempt to catch up to expected production levels.
The following costs were incurred in October:

600 of the 1,400 hours were subject to overtime premium. The total overtime premium is included in variable overhead in
accordance with company accounting practices.

Required:
Compute each of the following variances, showing all your work. Be sure to indicate whether the variances are favorable or
unfavorable.

## a. Direct material efficiency (quantity) variance.

b. Direct labor efficiency variance.