CPAREVI

EW SCHOOLOFTHEPHI
LIPPI
NES
Mani
la

MANAGEMENTADVI
SORYSERVI
CES
STANDARDCOSTI
NG&VARIANCEANALYSI
S

THEORY
1.Which one oft he fol
l
owi ng terms bestdescribes t
he rat
e ofout putwhi
ch
quali
fied wor
kerscan achi eve asan average overthe working dayorshi
ft,
wit
houtover -
exert
ion,providedtheyadheretot hespecif
iedmet hodofworki
ng
andar ewellmoti
vatedintheirwork?
A.St andardt
ime B.St andardhoursC.St andardunit D.St andard
perfor
mance

2.Thebestcharacteri
sti
csofast andardcostsyst
em i
s
A.standardcanpi npointresponsi
bil
it
yandhelpmotivati
on
B.al
l var
iancesfrom standardshouldbereviewed
C.al
l si
gnif
icantunfavorablevari
ancesshouldbereviewed
D.standardcostinvolvescostcontrolwhi
chiscostreducti
on

3.St
andardcost
sareusedforal
loft
hef
oll
owingexcept
:
A.incomedeter
minat
ion C.measur i
ngeff
ici
enci
es
B.contr
oll
i
ngcosts D.formingabasisf
orpri
ceset
ti
ng

4.St
andar
dcost sareleastuseful
for
A.Measuri
ngpr oducti
onef f
ici
ency C.Joborderproducti
onsyst
ems
B.Si
mplif
yingcosti
ngpr ocedures D.Deter
miningminimum i
nvent
oryl
evel
s

5.Towhi
chofthef
oll
owi
ngi
sastandar
dcostnearl
yli
ke?
A.Est
imat
edcost
.B.Budget
edcost.C.Productcost
. D.Per
iodcost
.

6.Adi
ffer
encebet weenstandardcost susedforcostcont
rolandbudgetedcosts
A.Canexi stbecausestandar dcostsmus tbedet erminedaft
erthebudgeti s
completed.
B.Can existbecause standard costsrepresentwhatcost sshoul
d be whi l
e
budgetedcostsrepresentexpectedactualcost
s.
C.Canexi stbecausebudget edcostsarehi st
ori
calcostswhil
estandardcosts
arebasedonengi neeri
ngst udi
es.
D.Can exi st because est abli
shi
ng budget ed cost s i
nvol
ves empl oyee
part
ici
pationandstandardcostsdonot .

7.Nor
mal cost
ingandst andar
dcost ingdiff
eri
nthat
A.thetwosystemscanshowdi f
ferentover
headbudgetvar iances.
B.onlynormalcostingcanbeusedwi thabsorpti
oncosting.
C.thetwosystemsshowdi fferentvolumevariancesifst
andar dhoursdonot
equalactualhours.
D.normalcosti
ngi slessappr opri
ateformulti
productfi
rms

8.Whenstandardcos t
sar eusedi napr ocess- cost
ingsystem,how,i fatal
l,are
equi
val
entunitsofpr oducti
on (EUP)i nvolved orused i nthe costreportat
st
andar
d?
A.Equi
valentuni
tsarenotused.
B.Equi
valentuni
tsarecomput edusi
ngaspeci alapproach.
C.Theactualequi
valentuni
tsaremult
ipliedbyt hestandardcostperuni
t.
D.Thestandardequi
valentuni
tsaremul ti
pli
edbyt heactualcostperuni
t.

MSQ-
04
Page1
9.Thet ypeofst andardthatisi
ntended t
orepresentchallenging yetat
tai
nabl
e
result
sis:
A.t heoret
ical
standar
d D.normal st
andard
B.f l
exibl
ebudgetstandard E.expectedactualstandard
C.cont rol
l
ablecostst
andard

MSQ-
04
Page2
 10.Acompanyusingver yti
ghtstandar dsi
nastandar
dcostsyst
em shoul
d
expectthat
A.Mostvar i
anceswil
lbeunf avorable
B.Noi ncenti
vebonuswi l
lbepaid
C.Costswi l
lbecont
rol
ledbet t
erthani fl
owerst
andardswereused
D.Empl oyeeswil
lbestr
onglymot i
vatedtoat
tai
nthestandar
d

1
1.Apredet erminedover headr at eforfi
xedcostsi
sunli
keastandardfi
xedcostper
uni
tinthatapr edet erminedover headr at
eis
A.basedonani nputf actorl
ikedi r
ectl
aborhoursandastandar
dcostperuniti
s
basedonauni tofoutput.
B.basedonpr acticalcapacit
yandast andar
dfi
xedcostcanbebasedonany
levelofact i
vity.
C.usedwi t
hvar iablecostingwhi l
east andar
dfi
xedcosti
susedwi t
habsor
pti
on
cos t
ing.
D.li
kelyt obehi gherthanast andardfi
xedcostperuni
t.

1
2.I
fa companywi shesto establ
i
sh fact
oryoverhead budgetsystem in whi
ch
esti
matedcostscanbederiveddirect
lyf
rom esti
matesofact
ivi
tyl
evels,i
tshoul
d
preparea
A.Flexibl
ebudget.B.Fi
xedbudget . C.Capitalbudget
.D.Discreti
onar
y
budget.

1
3.LantaRestaurantcomparesmonthl
yoper at
ingresult
swit
hast ati
cbudget.When
actualsal
esar el
essthanbudget,wouldLantausuallyr
eportfavorabl
evari
ances
onvar i
abl
efoodcost sandfi
xedsupervi
sorysalar
ies.
A. B. C. D.
Variabl
efoodcost s Yes Yes No No
Fixed supervi
sory Yes No Yes No
salari
es

1
4.Thepr i
mar ydif
ferencebet weenaf i
xed( stat
ic)budgetandavar iable(fl
exi
ble)
budgetisthatafixedbudget :
A.cannotbechangedaf t
ertheper i
odbegi ns;whileavar i
abl
ebudgetcanbe
changedaftertheper i
odbegins
B.isapl anforasi ngl
elevelofsal es( orot hermeasur eofacti
vit
y);whilea
vari
abl
ebudgetconsi stsofseveralpl ans,onef oreachofsever allevel
sof
sal
es(orothermeasur eofact i
vi
ty)
C.includesonlyfixedcosts;whil
evariablebudgeti ncludesonl
yvar
iablecosts
D.isconcer nedonl ywit
hf utur
eacqui siti
onsoff i
xedassets;whil
eavar i
able
budgetisconcer nedwithexpensesthatvar ywi t
hsal es

1
5.Whi
chofthefol
l
owingtermisbesti
denti
fi
edwi t
hasystem ofst
andar
dcost
?
A.Cont
ri
buti
onapproach. C.Mar gi
nalcost
ing.
B.Managementbyexcepti
on. D.Standardaccounti
ngsyst
em.

1
6.Whi
chdepartmenti
stypi
cal
lyr
esponsi
blef
oramat
eri
alspr
icevari
ance?
A.Engi
neer
ing. B.Pr oduct
ion. C. Purchasi
ng. D.
Sal
es.

1
7.Undera st andar
d costsyst em,t he mat
eri
als ef
fi
ciency vari
ance aret he
responsibi
l
it
yof
A.Pr oducti
onandi ndust
ri
alengi
neering.C. Pur chasingandsales.
B.Pur chasi
ngandi ndust
rial
engineeri
ng.D. Sal esandindustr
ialengi
neer
ing.

1
8.Whichoft
hefol
lowi
ngpeopleismostli
kel
yresponsi
blef
oranunf
avor
abl
e
var
iabl
eover
headeff
ici
encyvari
ance?
MSQ-
04
Page3
 A.product
ionsuper
visor C.suppli
er
B.account
ant D.purchasi
ngagent

1
9.Whichvari
anceisLEASTl i
kel
ytobeaf
fect
edbyhi r
ingwor kerswit
hlessski
llt
han
t
hosealr
eadywor ki
ng?
A.Materi
alusevariance. C.Materi
alpri
cevar i
ance.
B.Laborrat
evariance. D.Var
iabl
eover headef f
ici
encyvari
ance.

MSQ-
04
Page4
 20. Which ofthe fol
l
owing standar
d costi
ng var
iances woul
d be least
contr
oll
ablebyaproduct
ionsupervisor
?
A.Over headvol
ume.B. Materi
alsusage. C.Laboreffi
ciency.
D. Overheadeffi
ciency.

21
.Thevari
anceresul
ti
ngfrom obt
aini
nganoutputdi
ffer
entf
rom t
heoneexpected
onthebasi
sofinputi
sthe:
A.mixvari
ance B.usagevar i
anceC.yieldvar
iance D.eff
ici
encyvar
iance

22.
Fort hedoughnutsofMcDonutCo.t hePur chasing Managerdecided to buy
65,000 bagsoff l
ourwi t
h a qual
i
tyr at
ing two gradesbelow thatwhich the
companynor mall
ypurchased. Thi
spur chasecover edabout90% oft hef l
our
requirementf
ortheperiod.Ast othemat er
ialvari
ances,whatwillbetheli
kely
effect?
A. B. C. D.
Price Unfavorable Favor abl
e Noef fect Favorabl
e
variance
Usage Favorable Unf avorable Unf avorabl
e Favorabl
e
variance

23.
Usingthetwo-vari
ancemet hodforanal
yzi
ngoverhead,whi
choft
hef
oll
owi
ng
var
iancescont
ainsbothvari
ableandfi
xedover
headelement
s?
A. B. C. D.
Control
l
abl
e(Budget)Vari
ance Yes Yes Yes No
Vol
umeVar i
ance Yes Yes No No
Eff
ici
encyVari
ance Yes No No No

24.
Whichoft hef
oll
owingunfavorabl
evari
ancesi
sdi r
ect
lyaff
ect
edbyt herelat
ive
posi
ti
onofaproducti
onprocessonalearni
ngcurve?
A.Mat er
ial
smix. B.Material
spri
ce.C.Laborrat
e. D.Laboref
fi
ciency.

25. Amanagerpr eparedthef

oll
owingtablebywhi
chtoanal yzelaborcost
sfor
themont
h:
ActualHour sat ActualHoursat StandardHour sat
Act ual Rate StandardRate StandardRate
$10, 000 $9,
800 $8,820
Whatvari
ancewas$980?
A.Laboref f
iciencyvari
ance. C.Volumevari
ance.
B.Laborratevar iance. D.Laborspendingvar i
ance.

26. Acredi
tbalanceinthelaboreffi
ciencyvari
ancei
ndi
cat
est hat:
A.st
andardhoursexceedact ualhours
B.act
ualhoursexceedstandardhour s
C.st
andardrateandstandardhour sexceedactual
rat
eandact ualhour
s
D.act
ualrat
eandact ualhoursexceedst andar
drat
eandstandardhours

27.
Ift
heactuall
aborrat
eexceedsthest
andar
dl aborrat
eandtheactuall
aborhour s
exceedthenumberofhoursall
owed,thel
aborratevari
anceandlaboreffi
ciency
vari
ancewil
lbe
A. B. C. D.
LaborRateVari
ance Favor
able Favor able Unf avorabl
e Unf avorable
LaborEff
ici
ency Favor
able Unfavorable Favor abl
e Unf avorable
Vari
ance

28.
Intheanalysi
sofst
andardcostvar
iances
,thei
tem whi
chr
ecei
vest
hemost
diver
setreatmenti
naccounti
ngis

MSQ-
04
Page5
 A.Dir
ectlaborcost C.Dir
ectmat
eri
alcost
B.Factor
yoverheadcost D.Vari
abl
ecost
.

29. Whenexpensesest i
mat edforthecapacit
yattai
neddiff
erfrom t
heact
ual
expensesincur
red,t
heresult
ingbalanceist
ermedt he
A.Activi
tyvari
ance. C.Unfavorabl
evariance.
B.Budgetvar i
ance. D.Volumevariance.

MSQ-
04
Page6
 30. Thetot
aloverheadvari
anceis
A.Thedif
fer
encebetweenact ual
overheadcostsandbudgetedoverhead.
B.Basedonactualhoursworkedfort
heuni t
sproduced.
C.Thedif
fer
encebetweenact ual
overheadcostsandappli
edoverhead.
D.Thedif
fer
encebetweenbudget edoverheadandappli
edoverhead.

31
.Managementscruti
nizesvari
ancesbecause
A.Managementdesi res t
o detectsuch variances t
o be ableto plan f
or
promoti
ons.
B.Managementneedst odeter
minethebenef i
tsfor
egonebysuchvari
ances.
C.I
tisdesi
rabl
eunderconvent i
onalknowledgeongoodmanagement .
D.Managementr ecognizestheneedtoknow whyvar ianceshappentobeable
tomakecorrecti
veact i
onsandfai
rl
yrewar dgoodper f
ormers
.

32.
Ifa company uses a predeter
mi ned rateforabsor pt
ion ofmanuf act
uri
ng
overhead,t
hevolumevari
anceis
A.Theunder -orover
-appl
iedfi
xedcostel ementofoverhead.
B.Theunder -orover
-appl
iedvari
ablecostelementofover head.
C.Thedi ff
erencebetweenbudget ed costand actualcostoff i
xed over
head
i
tems.
D.Thedi ff
erencebet
weenbudget edcostandact ualcostofvar i
abl
eoverhead
i
tems.

33.
Thepr
oduct i
onvolumevar i
anceoccurswhenusi ngthe
A.Absorpti
oncostingapproachbecauseofpr oducti
onexceedi
ngt hesal
es.
B.Absorpti
oncost i
ngappr oachbecausepr oducti
ondiff
ersfrom thatusedin
set
ti
ngt hefi
xedoverheadr at
eusedinapplyingfi
xedoverheadt opr
oducti
on.
C.Vari
ablecosti
ngappr oachbecauseofsalesexceedingthepr oduct
ionfort
he
peri
od.
D.Vari
ablecosti
ngappr oachbecauseofproduct i
onexceedingthesalesfort
he
peri
od.

34.
Henl eyCompanyusesast andardcostsystem inwhi chitappliesmanufacturi
ng
over headtounitsofpr oductonthebasisofdi r
ectl aborhours.Forthemont hof
Januar y,the fixed manuf act
uring overhead vol ume variance was $2, 220
favor abl
e.Thecompanyusesaf ixedmanuf acturi
ngover headr at
eof$1 .
85per
directlaborhour.DuringJanuary,thestandarddi r
ectlaborhour sal
lowedforthe
mont h'
soutput:
A.exceededdenomi natorhoursby1,000. C. exceeded denomi nat
or
hoursby1,200.
B.f el
lshor
tofdenomi natorhoursby1,000. D. f el
lshor tofdenomi nat
or
hourby1,200.

35. Aspendi ngvariancef orvari

ablefactor
yO/ H basedondi r
ectlaborhoursis
thediff
erencebet weenact ualvari
ablefactor
yO/ H andthevari
ablefact
oryO/H
thatshouldhavebeeni ncurredfortheactualhoursworked.Thisvari
anceresul
ts
from
A.Pr i
ceandquant i
tydif
ferencesforoverheadcosts.
B.Pr i
cedi f
fer
encesf oroverheadcosts
C.Quant it
ydiff
erencesf oroverheadcosts
D.Di f
ferencescausedbypr oducti
onvolumevar i
ati
on

36. Whi ch ofthe f

ollowing isthe mostpr obablereason a company woul d
experi
ence an unfavorablelaborr at
e var i
ance and a favorable ef
fi
ciency
vari
ance?
A.Themi xofworkersassignedtothepar t
icularj
obwasheavil
ywei ght
edtowar d
t
heuseofhigher-paid,exper
iencedindi
viduals.

MSQ-
04
Page7
 B.Themixofwor kersassignedtothepar ti
cularj
obwasheavi lyweightedtoward
theuseofnew,r el
ati
velylow-pai
dunski l
ledwor kers.
C.Becauseoft hepr oductionschedule,wor kersfrom otherproductionareas
wereassignedtoassistinthi
spart
icularprocess.
D.Defect
ivemateri
alscausedmor elabort obeusedt oproductastandardunit
.

37.
Thevari
abl
efact
oryoverheadrateunderthenor
malvol
ume,pract
ical
capaci
ty,
andexpect
edacti
vit
ylevel
swoul dbethe
A.Sameexceptforpracti
calcapaci
tyC.Sameexceptfornormalvol
ume
B.Sameexceptforexpectedcapacit
yD.Samef oral
lt
hreeact
ivi
tyl
evel
s

MSQ-
04
Page8
 38.Acompanyr eportedasigni
ficantmat eri
alseff
ici
encyvar i
ancefort
hemont
h
ofJanuary.Al
lofthefol
lowi
ngar epossibleexplanati
onsforthi
svari
anceex
cept
A.Cutti
ngbackpr eventi
vemaintenance.
B.Inadequatel
ytrai
ningandsuper vi
si
ngt helaborforce.
C.Processingalargenumberofr ushor ders.
D.Producingmor eunit
sthanplannedf orinthemast erbudget.

39. Adebitbalanceinthel
aboreff
ici
encyvar
iancei
ndicat
esthat
A.Standardhoursexceedact
ualhours. C. St andardr at
e exceeds act
ual
rat
e.
B.Actualhoursexceedst
andardhours. D. Act ualr at
e exceeds st
andard
rat
e.

40.
Whattypeofdi r
ectmat eri
alvari
ancesforpri
ceandusagewi l
lar
iseift
heactual
numberofpoundsofmat erial
susedwasl essthanst
andar dpoundsall
owedbut
act
ualcostexceedsstandardcost?
A. B. C. D.
Usage Unfavorable Favorabl
e Favorable Unf
avorabl
e
Pri
ce Favorable Favorabl
e Unfavorable Unf avorabl
e

41
.Whichoneoft hef oll
owi ngwouldnotexplai
nanadver
sedi
rectl
aboref
fi
ciency
var
iance?
A.Poorschedulingofdi rectl
aborhours
B.Setti
ngstandardef f
iciencyatalevelt
hati
stool
ow
C.Unusuall
ylengthymachi nebreakdowns
D.Ar educt
ionindirectlabortr
aini
ng

42.
You used predetermined over head r
ates and the r
esult
ing vari
ances when
comparedwi thther esul
tsusi ngtheactualrat
eswer esubst ant
ial
. Product
ion
datai
ndicatedthatvolumeswer elowerthantheplanbyal argediff
erence.This
sit
uat
ioncanbeduet o
A.Over headbeingsubstant i
all
ycomposedoff i
xedcosts.
B.Over headbeingsubstant i
all
ycomposedofvar i
abl
ecost s
.
C.Over headcostsbeingr ecordedasplanned.
D.Productsbeingsimul t
aneousl ymanufact
uredinsi
ngleruns.
43.
During1 990,adepar t
ment ’ -var
iancefact
oryO/ Hstandardcosti
ngsyst em
reportedunfavorablespendingandvolumevar i
ances.Theact i
vi
tylevelselected
forall
ocatingfactor
yO/ Htot hepr
oductwasbasedon80% ofpr acti
calcapaci ty.
If100% ofpr acti
calcapacit
yhadbeensel ect
edinstead,how wouldther eported
unfavorablespendingandvol umevari
anceshavebeenaf f
ected?
A. B. C. D.
Spendi ng I
ncreased I
ncreased Unchanged Unchanged
Variance
VolumeVar i
ance Unchanged I
ncreased I
ncreased Unchanged
44.
The journalentryt or ecor
dt he directmat er
ial
s quant
it
y var
iance may be
recor
ded
A.Onl ywhendir ectmateri
alsar
epur chased
B.Onl ywhendir ectmateri
alsar
eissuedt oproducti
on
C.Either(a)or(b)
D.Wheni nvent
or yist
akenattheendoft heyear .
45.
Over
appli
edf act
oryover
headresul
tswhen
A.Aplantisoperat
edatlesst
hanit
snormal capaci
ty.
B.Factor
y overhead costsi
ncurr
ed are greaterthan t
he cost
s charged t
o
product
ion.
C.Factor
y overhead costsincur
red arel ess than t
he costs char
ged to

MSQ-
04
Page9
 product
ion.
D.Factor
yover head cost
sincur
red ar
e unr
easonabl
ylar
ge i
nrel
ati
on t
othe
numberofuni t
sproduced.
46.
Standar
dcostingwil
lproducethesamer esul
tsasact
ualorconvent
ionalcost
ing
whenstandardcostvari
ancesaredi
str
ibutedt
o
A.Costofgoodssol dandinvent
ori
esC.Ani ncomeorexpenseaccount
B.Abal ancesheetaccount D.Costofgoodssol
d

MSQ-
04
Page1
0
PROBLEMS
1.KNOTTY,I nc.estimatedt hecostofapr ojecti
tst
art
edinOct
ober1 9x4asf ol
l
ows:
Dir
ectmat er
ial
s,P495, 000;di r
ectlabor,6,000hoursatP30perhour ;var
iabl
e
overhead,P24perdi rectl aborhour.Byt heendoft hemonth,alltherequir
ed
material
shavebeenusedatP491 ,
900;laborwas80% completeat4, 650hour s
atP30perhour ;and,t hevar i
abl
eover headamountedtoP11 3,700. Thetotal
vari
ancef ortheprojectasatt heendoft hemonthwas
A.P7, 500U B.P8, 400U C.P9, 000F D.P9, 00F

2.SUPERCo.atnor malcapaci ty,operatesat600, 000l aborhourswithstandar d

l
aborr ateofP20perhour .Var i
abl
ef actor
yoverheadi sappli
edattherateofP1 2
perlaborhour .Fouruni t
sshoul dbecompl et
edinanhour .
Lastyear ,1,350,000unitswer eproducedusi ng300, 000laborhours.Al llabor
hourswer epai datt hest andardr ate,andactualover headcostconsist edof
P3,738,000f orvariabl
eitemsandP3, 000,
000f i
xeditems .
Thet otallaborandover headcost ssaved,bypr oducingatmor ethanstandar d,
amount edt o
A.P450, 000 B.P500, 000 C.P750,000 D.P1 ,
200,000

3.Adef ensecont
ract
orforagovernmentspaceproj
ecthasincur
red$2, 500,
000in
actualdesi
gncoststodateforaguidancesyst
em whoset ot
albudget eddesi
gn
costis$3,000,
000.Ifthedesi
gnphaseoft heproj
ectis60% compl ete,whati
s
theamountofthecontract
or'
scurr
entoverr
unorsavingsonthi
sdesignwor k?
A.$300, 000savi
ngs. C.$500,
000savings.
B.$500, 000overr
un. D.$700,
000over r
un.

4.HankiesUnl i
mitedhasasi gnaturescar fforladi est
hatisverypopul ar.Cer tai
n
productionandmar ketingdat aareindicatedbel ow:
Costperyar dofcl oth P36.00
Al
lowancef orreject edscar f 5% ofproduct ion
Yardsofcl othneededperscar f 0.475yar d
Ai
rfreightfrom suppl ier P0.60/ yard
Mot orfrei
ghtt ocust omer s P0.90/ scarf
Purchasedi scount sf rom supplier 3%
Salesdiscountt ocust omers 2%
Theallowancef orrejectedscar fisnotpar toft he0.475yardofcl ot
hperscar f.
Rejectshavenomar ketval ue.Mat eri
alsareusedatt hestar
tofproduct i
on.
Calcul
at ethest andar dcostofcl othperscar ft hatHankiesUnli
mi t
edshoul duse
i
ni t
scostsheet s.
A.P1 6.87 B.P1 7.76 C.P1 8.21 D.P17.30

5.ALPHACo.usesas tandardcostsyst
em.Di rectmat
eri
alsstati
sti
csf
ort
hemont
h
ofMay,19x7aresummar i
zebelow:
St
andardunitpri
ce P90. 00
Act
ualunit
spurchased 40,000
St
andard units all
owed f or actual 36,250
pr
oducti
on
Mater
ial
spricevari
ance-favorabl
e P6,000
Whatwast heactualpurchasepri
ceperunit?
A.P75.00 B.P85. 89 C.P88. 50 D.P89.85

6.ChemKi ng usesa standard cost

ing system inthe manuf act
ure ofitssingle
product. The 35,000 unit
sofr aw mat eri
alininventor
ywer e purchased for
$105,000,andt wounit
sofr aw mater
ialarerequi
redtopr oduceoneuni toffi
nal
product.InNovember ,t hecompanypr oduced1 2,
000uni tsofproduct. The
st
andard all
owed f ormat er
ialwas $60, 000,and there was an unfavorable
quanti
tyvarianceof$2,500.Themat eri
alspri
cevar i
ancef ortheunit
susedi n

MSQ-
04
Page1
1
Novemberwas
A.$2,500U B.$1
1,000U C.$1
2,500U D.$3,
500F

MSQ-
04
Page1
2
 7.The Por terCompany has a st andard costsyst
em.I n Jul
yt he company
purchased and used 22,500 poundsofdi r
ectmat er
ialatan actualcostof
$53,000;the mat er
ial
s quanti
ty vari
ance was $1 ,
875 Unfavorabl
e;and the
st
andar dquanti
tyofmat eri
alsal
lowedf orJulyproduct
ionwas21 ,
750pounds.
Themat eri
al
spricevari
anceforJulywas:
A.$2, 725F. B.$2,725U. C.$3, 250F. D.$3,250U.

8.CoxCompany' sdirectmat eri

al cost
sf ort
hemont hofJanuar
ywer easf ol
lows:
Actualquantit
ypur chased 18,000kilograms
Actualunitpurchasepr i
ce $ 3.60per
ki
logram
Mat er
ial
spr i
cevariance–unf avorable(basedon $3,600
purchases)
Standardquant i
tyall
owedf oractualproduction 1
6, 000kilograms
Actualquantit
yused 1
5, 000kilograms
ForJanuarytherewasaf avorabledirectmaterialquant
it
yvarianceof
A.$3,360. B.$3,375. C.$3,400. D.$3, 800.

9.JKLCompanyhasast andardof1 5partsofcomponentXcost ingP1 .

50each.
JKLpur chased14,
910unitsofcomponentXf orP22,
145.JKLgener atedaP220
favorabl
epr i
cevar
ianceandaP3, 735favorabl
equanti
tyvari
ance.Iftherewer e
nochangesi nthecomponenti nvent
ory,how manyuni tsoffini
shedpr oduct
wer eproduced?
A.994uni ts. B.1,090unit
s. C.1 ,
000units D.1,1
60uni t
s

1
0.Thef
oll
owingdir
ectlaborinfor
mati
onper t
ainstothemanufact
ureofproductGlu:
Ti
mer equi
redtomakeoneuni t 2di
rectl
aborhours
Numberofdirectwor ker
s 50
Numberofpr oduct
ivehoursperweek,perwor ker 40
Weeklywagesperwor ker $500
Workers’
Whati
sthestandarddirectl
aborcostperunitofproductGl
u?
A.$30. B.$24. C.$1 5. D.$12.

1
1.ACECompany’ ,000
dir
ectlaborhourl evel,withbudget eddi r
ectlaborofP960, 000andbudget ed
vari
ableover headofP240, 000. Theact ualresul
tsrevealedt hatdi r
ectlabor
i
ncurredamount edt oP1 ,
1 48,000 andt hattheunf avorabl
evar i
ableover head
vari
ancewasP40, 000. Labort roublecausedanunf avorablel aboref f
ici
ency
vari
anceofP1 20,000,andnew empl oyeeshiredathigherr atesr esul
tedinan
actualaveragewager at
eofP1 6.40perhour . Thetotalnumberofst andard
dir
ectlaborhoursallowedf ortheact ualunit
sproducedis
A.P52, 500 B.P60, 000 C.P62, 500 D.P70, 000

1
2.PaneCompany' sdir
ectlaborcost
sforApri
lar
easfol
lows:
Standarddir
ectlaborhours 42,
000
Actualdir
ectl
aborhour s 41,
200
Totaldi
rectl
aborpayr ol
l $247,
200
Directl
aboreff
iciencyvari
ance–favor
able $3,
840
WhatisPane'sdir
ectlaborrat
evari
ance?
A.$44,496U B.$49,440U C.$49,440F D.$50,
400F

1
3.TAMARAW,I nc.hasamai nt
enanceshopwher er epairstoit
smot orvehicl
esare
done. Duri
nglastmonth’ ,cert
ainrecor dedwer elost
. Theact ual
i
nputofdi r
ectlaborhourswas1 ,
000,and the r esult
ing di
rectl
aborbudget
var
iancewasaf avor
ableP3,400.ThestandarddirectlaborratewasP28. 00per
hour,butanunexpectedlaborshort
agenecessitatedt hehi r
ingofhigher-pai
d
MSQ-
04
Page1
3
 worker
sforsomejobsandhadresult
edi
narat
evar
ianceofP800.Theact
ual
di
rectl
aborr
atewas
A.P27.20perhour
B.P28.80perhour C. P30.
25perhour
D. P31.
40perhour

1
4.To improve productivi
ty,ST.MI CHAEL Cor p.i nsti
tut
ed a bonuspl an where
employees are paid 75% oft he ti
me saved when pr oduction perfor
mance
exceedsthestandardl evelofproducti
on.Thecompanycomput est
hebonuson
thebasi
soff our-weekper i
ods.Thest andardpr oducti
oni ssetat3uni tsperhour.
Eachempl oyeewor ks37hour sperweek,andt hewager at
ei sP24perhour .
Belowaredat aforone4- weekper i
od:
WeeklyProduct i
on(Units)
r
d
Employee 1st 2nd 3 4th Total
ALAN 107 100 110 108 425
JOEL 104 110 115 11 5 444
ROMY 108 112 112 133 465
TONY 123 120 119 124 486
Theempl oyeewhohadt heinconsist
entper formance( somet i
mesper f
orming
belowstandard)butgotabonusi s
A.Alan=P36bonus . C.Romy=P1 26bonus.
B.Joel=P54bonus . D.Tony=P252bonus.

1
5.PALOSManuf acturi
ngCo.hasanexpect edpr oduct
ionlevelof175,
000product
unit
sfor19x7. Fixedfactor
yoverheadisP450, 000andt hecompanyapplies
fact
oryover
headont hebasisofexpect
edpr oducti
onlevelattherateofP5.
20
perunit
.Thevari
abl eover
headcostperuni
tis
A.P2.57 B.P2.63 C.P2.93 D.P3.02

1
6.Thefoll
owingwer eamongGageCo. ’ :
Normal spoi
l
age $ 5,000
Frei
ghtout 10,
000
Excessofactualmanufactur
ingcost
soverst
andar
dcost
s 20,
000
Standardmanufact
uringcosts 1
00,000
Actualpri
memanuf acturi
ngcosts 80,
000
Gage’
A.$40, 000 B.$45, 000 C.$55,
000 D.$1
20,
000

1
7.NilCo.usesapr edeterminedfactor
yO/ H appli
cati
onratebasedondi r
ectlabor
cost. Fort he yearended December31 ,Ni l
’
$600,000,based on a budget ed vol
ume of50, 000 di
rectl
aborhour s,ata
standard di
rectl
aborr at
e of$6 perhour . Actualfact
oryO/H amount ed to
$620,000,wi t
hactualdir
ectlaborcostof$325,000.Fort heyear,over-appl
ied
factor
yO/ Hwas
A.$20, 000 B.$25, 000 C.$30, 000 D.$50,000

1
8.PetersCompany usesa f l
exi
ble budgetsyst em and pr
epared the fol
lowing
i
nformat i
onf ort heyear
Percent
ageoftot
alcapacit
y
80% 90%
Directlaborhour s 24,000 27,000
Variablefact oryO/H $48,000 $54,000
Fixedfact or yO/H $108,000 $108,000
Totalfactor yO/ HrateperDLH $6.50 $6.00
Petersoper at edat80% capaci tyduringtheyearbutappl i
edf act
oryover head
basedont he90% capaci t
ylevel
.Assumi ngt hatact
ualf
actoryO/Hwasequal t
o
the budget ed amountf orthe att
ained capacity,whatisthe amountofO/ H
vari
ancef ort heyear ?
MSQ-
04
Page1
4
 A.$6,
000over
-absorbed. C.$1
2,000over-
absor bed.
B.$6,
000under
-absorbed. D.$1
2,000under-absorbed.

1
9.MNO Company appliesover
headatP5perdi r
ectl
aborhour.InMarch2001,
MNO i
ncurr
edover headofP1 20,
000. Underappl
i
edover headwasP5,000.
Howmanydirectl
aborhoursdi
dMNOwor k?
A.25,
000 B.22,000 C.24,000 D.23,000

MSQ-
04
Page1
5
 20. Atthebegi
nni
ngoft
heyear
,Smi
thI
nc.budget
edt
hef
oll
owing:
Units 10,
000
Sal
es $100,
000
Minus:
Totalvari
abl
eexpenses 60,
000
Totalfi
xedexpenses 20,
000
Netincome $20,000

Factoryoverhead:
Variabl
e $30,000
Fixed 10,
000
Therewer enobegi nni
ngi nvent
ori
es.Attheendoft heyear
,nowor kwasi n
process ,t
otalf
actoryoverheadincurr
edwas$39, 500,andunderappl
iedfact
ory
overheadwas$1 ,500.Factoryoverheadwasappl i
edont hebasisofbudgeted
unitproducti
on.Howmanyuni tswereproducedthi
syear?
A.1 0,250. B.10,000. C.9,875. D.9,500.

21
.Premi sed on pastexper i
ence,Mayo Cor p.adopt ed t
he foll
owing budget
ed
formul af oresti
mat i
ngshippingexpenses.Thecompany’
kil
ospershi pment .
Shippingcost s=P8, 000+( 0.25xkgs.shipped)
Planned Actual
Salesor der 800 780
Shipment s 800 820
Uni tsshipped 8,000 9,000
Sales 240,000 288,000
Total ki
lograms 9,600 12,300
shipped
Theact ualshippingcost sforthemonthamount edtoP10,500.Theappr opri
ate
mont hly f lexi
ble budget al l
owance f or shipping costs for purposes of
performanceeval uationwouldbe
A.P1 0, 250 B.P1 1,
075 C.P1 0,340 D.P1 0,400

22.
UniversalCompanyusesast andar
d costsyst
em and pr
epar
ed t
hef oll
owi
ng
budgetatnor mal capaci
tyf
ort
hemonthofJanuary:
Directlaborhours 24,000
Variablefactor
yO/ H $48,000
FixedfactoryO/ H $108,000
TotalfactoryO/HperDLH $6.50

Actual dataforJanuar
ywer easfoll
ows:
Directlaborhoursworked 22,
000
Total f
actoryO/H $147,
000
Standar dDLHal l
owedf orcapaci
tyatt
ained 21,
000
Usi
ngt hetwo- wayanalysisofO/H vari
ances,whati
sthebudget(contr
oll
abl
e)
var
iancef orJanuary?
A.$3, 000F. B.$1 3,500U. C.$9,000F. D.$10,500U.

23.
ABC Companyusest heequati
onP300,000 + P1.
75 perdir ectlaborhourt o
budgetmanuf act
ur i
ngoverhead.ABChasbudget ed1 25,
000di r
ectlaborhours
fortheyear. Act ualresul
tswere110,000 di
rectl
aborhour s,P297, 000 f
ixed
overhead,andP1 94,500variabl
eover
head.Whati sthefixedover headvolume
vari
ancefortheyear ?
A.P35, 000U. B.P36,000U. C.P2,000F D.P3, 000F

24.
JKLCo.hastotalbudget
edf i
xedcostsofP75,
000.Actualpr
oducti
onof19,500
uni
tsr
esul
tedina$3, 000favorabl
evolumevar
iance.Whatnormalcapaci
tywas
MSQ-
04
Page1
6
usedt
odeter
minet
hef
ixedover
headr
ate?
A.18,
750 B.20,31
3 C.17,
590 D.1
6,500

MSQ-
04
Page1
7
 25. TYD,I nc.reportedt hefoll
owingdat
afor1996:
Actual hour s 120,
000
Denomi natorhour s 150,
000
Standar dhour sallowedf oroutput 140,
000
Fixedpr edet er
mi nedover headrate P6perhour
Variablepr edeterminedover headrate P4perhour
TYD’
a.P60, 000whi chisneitherfavorabl
enorunder-
appli
ed.
b.P60, 000f avorable.
c.Novol umevar iance.
d.P60, 000under -appli
ed.

26. Pat ri
dge Company uses a st andard cost system in whi ch it appl
i
es
manuf act ur
ingover headtouni tsofpr oductont hebasisofdirectlaborhours.
The i nformat i
on bel ow ist aken f r
om t he company'sf l
exibl
e budgetf or
manuf act ur
ingover head:
Per centofcapaci ty 70% 80% 90%
Directlaborhour s 21,
000 24,
000 27,000
Var i
ableover head $42, 000 $48,
000 $54,000
Fixedover head 108,000 108,
000 108,000
Total overhead $150,000 $156,
000 $162,000
Duringt heyear ,thecompanyoper atedatexactly80% ofcapacity,butappli
ed
manuf act ur
ingover headt opr oductsbasedont he90% level.Thecompany' s
fi
xedover headvol umevariancef ortheyearwas:
A.$6, 000U. B.$6,000F. C.$1 2,
000U D.$1 2,000F.

27.
Mar gol
os,Inc.endst hemonthwit
havolumevarianceof$6,360unfavorabl
e.I
f
budgetedf ixedfactoryO/H was$480,000,O/H wasappliedont hebasisof
32,000 budget ed machine hour
s,and budgeted var
iabl
ef act
ory O/H was
$170,000,whatwer et heact
ualmachi
nehours(
AH)f ort
hemont h?
A.32, 424 B.32,000 C.31,
687 D. 31 ,576

28.
WebCompanyusesast andardcostsystem inwhi chmanuf actur
ingoverheadis
appli
edt ouni
tsofpr oductont hebasisofmachi nehour s.Dur i
ngFebruary,the
companyusedadenomi natoracti
vi
tyof80, 000machi nehour sincomput i
ngi t
s
predetermi
nedover headr ate.However ,only75, 000st andar dmachinehour s
wereal l
owedf orthemont h'
sactualproduction.I ft
hef ixedover headvolume
vari
ancef orFebruarywas$6, 400 unfavorable,thent het otalbudgetedf i
xed
overheadcostforthemont hwas:
A.$96, 000. B.$1 02,400. C.$1 00,000. D.$98, 600.

29. Thef ol
lowinginformat
ionisavai
labl
efr
om t
heTyr
oCompany:
Actual fact
oryO/ H $15,
000
FixedO/ Hexpenses,actual $7,
200
FixedO/ Hexpenses,budgeted $7,
000
Actual hours 3,
500
Standar dhours 3,
800
VariableO/ HrateperDLH $2.
50
Assumi ng thatTyrousesat hree-
wayanalysi
sofO/H var
iances,whatist
he
spendingvar i
ance?
A.$750F. B.$750U. C.$950F D.$200U

30. AtOver landCompany,mai ntenancecosti sexclusi

velyavar iabl
ecostt hat
var
iesdi
rect l
ywithmachine-hour s.Theperf
ormancer eportforJulyshowedt hat
act
ualmai ntenance coststotaled $9,800 and t
hatt he associated spendi
ng
var
iancewas$200unf avor
able.I f8,000machine-hourswer eact ual
l
ywor ked
dur
ingJuly,thebudgetedmai ntenancecostpermachi ne-hourwas:
MSQ-
04
Page1
8
A.$1
.20. B.$1
.25. C.$1
.275. D.$1
.225.

MSQ-
04
Page1
9
 31.Gi
venforthevar i
ablefactoryoverheadofGHIPr oducts
,I nc.
:P39,500act
ual
i
nputatbudget edrate,P41,500flexi
blebudgetbasedonst andardi
nputal
l
owed
foractualoutput,P2,500 f avor
ablef l
exi
ble budgetvar iance. Computethe
spendi
ngvariance.
A.P500unf avorabl
e. C. P500f avorabl
e.
B.P2,000favor abl
e. D. P2, 000unf avorable.

32.
Dalyhada$1 8,
000f avorablevol
umevari
ance,a$15,
000unfavorabl
evari
able
overhead spendi
ng vari
ance,and $12,
000 tot
alover
-appl
i
ed overhead. The
fi
xedoverheadbudgetvar i
ancewas
A.$9, 000F. B.$1 6,000F. C.49,000U. D.$16,000U.

Problems33and34ar ebasedont hef oll

owi nginformati
on.
TheMABI NICANDYFACTORYhast hef ol
lowi ngbudgetedf actoryover headcosts:
Budgeted f i
xed mont hly f actor y P85, 000
overheadcosts
Vari
ablefactoryoverhead P4.
00perdi rectlaborhour
Forthemont hofJanuar y,t
hest andarddi rectlaborhoursal l
owedwer e25, 000.An
analysi
s oft he factory overhead shows t hatin Januar y,t he factory had an
unfavorable budget( contr
oll
able)var iance ofP3, 500 and a f avorable vol
ume
vari
ance ofP1 ,
200. The f actoryusesa t wo- wayanal ysisoff actoryover head
vari
ances.

33.
Theact
ualfact
oryover
headincur
redi
nJanuar
ywas
A.P186,200 B.P188,
500 C.P181,
500 D.P1
03,
500

34.
Theappl
i
edfact
oryover
headinJanuar
ywas
A.P188,
500 B.P183,
800 C.P1
86,
200 D.P1
03,
500

Questi
ons35&36ar ebasedont hefoll
owinginformat
ion.
RaffCo.hasast andar dcostsystem inwhi chmanufactur
ingoverheadisappliedto
unit
sofpr oductont hebasi sofdirectlaborhours(DLHs).Thefoll
owingstandards
arebasedon1 00, 000di rectl
aborhour s:
Var
iableover head 2DLHs@$3perDLH=$6peruni t
Fi
xedover head 2DLHs@ $4perDLH=$8peruni t
Thefoll
owi ngi nfor mat ionpertai
nsoper ati
onsduringMarch:
Uni
tsact uallypr oduced 38,000
Act
ual directlaborhour swor ked 80,000
Act
ual manuf act ur i
ngover headincurred:
Variableover head $250,000
Fixedover head $384,000

35. ForMar
ch,t
hevar
iabl
eoverheadspendi
ngvar
iancewas:
A.$6,
000F. B.$10,000U. C.$12,
000U. D.$22,
000F.

36.ForMarch,t
hef
ixedover
headvol
umevar
iancewas:
A.$96,
000U. B.$96,000F. C.$80,000U. D.$80,
000F.

Quest i
ons37t hru39ar ebasedont hefoll
owingi nformati
on.
TheMur r
ayCompanymakesandsel lsasinglepr oduct.Thecompanyr ecordedt he
fol
l
owi ngactivi
tyandcostdat aforMay:
Numberofuni tscompl eted 45,000uni t
s
Standarddirectlabor-hoursallowedperuni tofproduct 1.5DLHS
Budgeteddi rectlabor
- hours(denomi natoractivi
ty) 72,000DLHS
Actualfi
xedover headcost sincur r
ed $66,000
Volumevar iance $4,275U
Thefixedpor t
ionoft hepredetermi nedover headr ateis$0.95perdi
rectlabor-hour.
MSQ-
04
Page20
MSQ-
04
Page21
 37.Theamountoffixedover
headcont
ainedi
nt hecompany'
soverheadf
lexi
ble
budgetforMaywas:
A.$64,125. B.$67,500. C.$68,400. D.$70,275.

38.
Theamountoffi
xedmanufact
uri
ngover
headcostappl
i
edtowor ki
npr
ocess
dur
ingMaywas:
A.$61,
725. B.$62,
700. C.$42,
750. D.$64,
125.

39. Thefi
xedover
headbudgetvar
ianceforMaywas:
A.$2,
400U. B.$2,
400F. C.$6,
000U. D.$6,
000F.

Questions40and41ar ebasedont hefol

lowinginfor
mat ion.
ValenzuelaPl ast
icsInc.hassetast andardcost,P5. 25peruni tforMat er
ialD and
P1 2.
25peruni tf
orMat er
ialE.InJune,Val enzuelabought1 7,
500uni t
sofMat eri
alD
and8, 750uni tsofMat er
ialE.Al lMateri
alD,except1 ,
400uni t swereboughtatt he
standarduni tcost. The1 ,400uni t
shadauni tcostofP6. 1
5. Val enzuel
abought
7,875uni t
sofMat er
ialEatstandardcostand875uni t
satauni tcostofP1 4.
Inaccor dancewi ththestandardt wouni t
sofMat er
ialDandoneuni tofMat eri
alE
shouldbeusedt omakeeachuni tofProductF.I nJanuar y,7,000uni tsofProductF
wer emadeand1 5,
050uni tsofMat eri
alDwer eusedand7, 1 75unitsofMat eri
alE
wer eused.

40.
Thet
otalmater
ial
spri
cevar
iancei
s
A.P2,791.
25F B.P2,
791,25U C.P1
3,781
.25F D.P1
3,781
.25U

41
.Thet
otalmater
ial
squant
it
yvar
iancei
s
A.P7,656.
25F B.P7, 656.
25U C.P1
3,781
.25F D.P1
3,781
.25U

Questions42and43ar ebasedont hefoll

owinginformation.
Basedonnor malcapacit
yoper ati
ons,Sta.AnaCompanyempl oys25wor ker
si ni
ts
Refi
ningDepar tment,working8hour saday,20dayspermont hatawager ateof
P6perhour .Atnor malcapacity,producti
onint hedepar tmentis5,000uni tsper
month.I ndirectmat er
ial
saverageP0. 25perdirectlaborhour;indi
rectlaborcostis
12½% ofdi rectlaborcost;andotheroverheadar eP0.15perdi r
ectlaborhour.
Theflexiblebudgetatt henor malcapacit
yactivi
tylevelf
ollows:
Di r
ectmat er
ial
s P 4,000
Di r
ectl abor 24,
000
Fixedf actoryoverhead 1,200
Indirectmat eri
al
s 1,
000
Indirectlabor 3,
000
Ot herover head 600
Tot al P 33,800
Costperuni t P6.76

42.
Thecostperuni
tat60% capaci
tyi
s
A.P6.00 B.P6.50 C.P6.
82 D.P6.
92

43.
Thet
otalpr
oduct
ioncostf
oronemont
hat80% capaci
tyi
s
A.P20,760 B.P21 ,
500 C.P27,
280 D.P30,
160

MSQ-
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ANSWERKEY
Theor
y Probl
em
1.D 26.A 1.D 26.C
2.A 27.D 2.D 27.D
3.A 28.B 3.D 28.B
4.D 29.B 4.B 29.A
5.B 30.C 5.D 30.A
6.B 31.D 6.C 31.C
7.C 32.A 7.C 32.A
8.C 33.B 8.C 33.B
9.D 34.C 9.D 34.C
10.A 35.A 10.A 35.B
11.A 36.A 11.C 36.A
12.A 37.D 12.B 37.C
13.B 38.D 13.B 38.D
14.B 39.B 14.C 39.B
15.B 40.C 15.B 40.B
16.C 41.B 16.A 41.B
17.A 42.A 17.C 42.D
18.A 43.C 18.D 43.C
19.C 44.B 19.D
20.A 45.C 20.D
21.C 46.A 21.B
22.B 22.A
23.C 23.B
24.D 24.A
25.A 25.D

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