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1. A purpose of standard costing is to:

a. allocate cost with more accuracy

b. eliminate the need for subjective decisions by management

c. control costs

d. all of the above

2. Standard costs are least useful for

a. Measuring production efficiency c. Job order production systems

b. Simplifying costing procedures d. Determining minimum inventory levels

3. Which one of the following is true concerning standard costs?

a. If properly used, standards can help motivate employees.

b. Unfavorable variances, material in amount, should be investigated, but large favorable

variances need not be investigated.

c. Standard costs are estimates of costs attainable only under the most ideal conditions, but

rarely practicable.

d. All of the above

4. What type of direct material variances for price and usage will arise if the actual number of

pounds of materials used was less than standard pounds allowed but actual cost exceeds

standard cost? Usage Price Usage Price

a. unfavorable favorable c. favorable unfavorable

b. favorable favorable d. unfavorable unfavorable

5. If a company follows a practice of isolating variances at the earliest time, the appropriate time to

isolate and recognize a direct materials price variance would be when:

a. the purchase order is originated c. the materials requisition is prepared

b. materials are purchased d. materials are used in production

6. Which of the following would least likely cause an unfavorable materials quantity (usage)
variance?

a. labor that possesses skills equal to those required by the standards

b. scheduling of substantial overtime

c. materials that do not meet specifications

d. machinery that has not been maintained properly

7. Information about Sargent Company's direct material costs is as follows:

Standard unit price ₱3.60

Actual quantity purchased 1600

Standard quantity allowed for actual production 1,450

Unfavorable materials purchase price variance ₱240

What was the actual purchase price per unit, rounded to the nearest penny?

a. ₱3.06 b. ₱3.11 c. ₱3.45 d. ₱3.75

8. A manager prepared the following table by which to analyze labor costs for the month:

Actual Hours at Actual Rate ₱10,000

Actual Hours at Standard Rate ₱9,800

Standard Hours at Standard Rate ₱8,820

What variance was ₱980?

a. Labor efficiency variance. c. Volume variance.

b. Labor rate variance . d. Labor spending variance.

9. When a change in the manufacturing process reduces the number of direct labor hours and

standards are unchanged, the resulting variance will be:

a. an unfavorable labor usage variance c. a favorable labor rate variance

b. an unfavorable labor rate variance d. a favorable labor usage variance

10. The most probable reason a company would experience a favorable labor rate variance and an

unfavorable labor efficiency variance is that:

a. the mix of workers assigned to the particular job was heavily weighted toward the use of higher paid,
experienced individuals

b. the mix of workers assigned to the particular job was heavily weighted toward the use of new,
relatively low-paid, unskilled workers

c. because of the production schedule, workers from other production areas were assigned to assist in
this particular process
d. defective materials caused more labor to be used in order to produce a standard unit

11. The type of standard that is intended to represent challenging yet attainable results is:

a. theoretical standard c. normal standard

b. flexible budget standard d. expected actual standard

12. ChemKing uses a standard costing system in the manufacture of its single product. The 35,000

units of raw material in inventory were purchased for ₱105,000, and two units of raw material

are required to produce one unit of final product. In November, the company produced 12,000

units of product. The standard allowed for material was ₱60,000, and there was an unfavorable

quantity variance of ₱2,500. The materials price variance for the units used in November was

a. ₱2,500 U b. ₱11,000 U c. ₱12,500 U d. ₱3,500 F

13. Which variance is LEAST likely to be affected by hiring workers with less skill than those already

working?

a. Material use variance. c. Material price variance.

b. Labor rate variance. d. Variable overhead efficiency variance.

14. Which of the following term is best identified with a system of standard cost?

a. Management by objectives. c. Marginal costing.

b. Management by exception. d. Standard accounting system.

15. Pane Company's direct labor costs for April are as follows:

Standard direct labor hours 42,000

Actual direct labor hours 41,200

Total direct labor payroll ₱247,200

Direct labor efficiency variance – favorable ₱3,840

What is Pane's direct labor rate variance?

a. ₱44,496 U b. ₱49,440 U c. ₱49,440 F d. ₱50,400 F

16. TAMARAW, Inc. has a maintenance shop where repairs to its motor vehicles

are done. During last month’s labor strike, certain records were lost. The actual input of direct

labor hours was 1,000, and the resulting direct labor efficiency variance was a favorable P3,400.
The standard direct labor rate was P28.00 per hour, but an unexpected labor shortage

necessitated the hiring of higher-paid workers for some jobs and had resulted in a rate variance

of P800. The actual direct labor rate was

a. P27.20 per hour b. P28.80 per hour c. P30.25 per hour d. P31.40 per hour

17. Which of the following standard costing variances would be least controllable

by a production supervisor?

a. Overhead volume. b. Materials usage. c. Labor efficiency. d. Overhead efficiency.

18. For the doughnuts of McDonut Co. the Purchasing Manager decided to buy

65,000 bags of flour with a quality rating two grades below that which the company normally

purchased. This purchase covered about 90% of the flour requirement for the period. As to the

material variances, what will be the likely effect?

A. B. C. D.

Price variance Unfavorable Favorable No effect Favorable

Usage variance Favorable Unfavorable Unfavorable Favorable

19. JKL Company has a standard of 15 parts of component X costing P1.50 each. JKL purchased

14,910 units of component X for P22,145. JKL generated a P220 favorable price variance and

a P3,735 favorable quantity variance. If there were no changes in the component inventory,

how many units of finished product were produced?

a. 994 units. b. 1,090 units. c. 1,000 units d. 1,160 units

20. A company using very tight standards in a standard cost system should expect that

a. Most variances will be unfavorable

b. No incentive bonus will be paid

c. Costs will be controlled better than if lower standards were used

d. Employees will be strongly motivated to attain the standard

21. Using the two-variance method for analyzing overhead, which of the following

variances contains both variable and fixed overhead elements?

 A. B. C. D.

Controllable (Budget) Variance Yes Yes Yes No

Volume Variance Yes Yes No No

Efficiency Variance Yes No No No

22. The total overhead variance is

A. The difference between actual overhead costs and budgeted overhead.

B. Based on actual hours worked for the units produced.

C. The difference between actual overhead costs and applied overhead.

D. The difference between budgeted overhead and applied overhead.

23. MNO Company applies overhead at P5 per direct labor hour. In March 2020,

MNO incurred overhead of P120,000. Under applied overhead was P5,000. How many direct

labor hours did MNO work?

a. 25,000 b. 22,000 c. 24,000 d. 23,000

24. Universal Company uses a standard cost system and prepared the following budget at normal

capacity for the month of January:

Direct labor hours 24,000

Variable factory O/H ₱48,000

Fixed factory O/H ₱108,000

Total factory O/H per DLH ₱6.50

Actual data for January were as follows:

Direct labor hours worked 22,000

Total factory O/H ₱147,000

Standard DLH allowed for capacity attained 21,000

Using the two-way analysis of O/H variances, what is the controllable variance for January?

a. ₱3,000 F. b. ₱13,500 U. c. ₱9,000 F. d. ₱10,500 U.

25. The four-variance method reconciles to the two-variance method by combining which of the
following to get the controllable variance?

a. fixed efficiency variance and idle capacity variance

b. spending variance and fixed efficiency variance

c. spending variance and idle capacity variance

d. spending variance and variable efficiency variance

26. ABC Company uses the equation P300,000 + P1.75 per direct labor hour to budget manufacturing
overhead. ABC has budgeted 125,000 direct labor hours for the year. Actual results were 110,000 direct
labor hours, P297,000 fixed overhead, and P194,500 variable overhead. What is the fixed overhead
volume variance for the year?

a. P35,000 U. b. P36,000 U. c. P2,000 F d. P3,000 F

27. The following information is available from the Tyro Company:

Actual factory O/H ₱15,000

Fixed O/H expenses, actual ₱7,200

Fixed O/H expenses, budgeted ₱7,000

Actual hours 3,500

Standard hours 3,800

Variable O/H rate per DLH ₱2.50

Assuming that Tyro uses a three-way analysis of O/H variances, what is the spending variance?

a. ₱750 F. b. ₱750 U. c. ₱950 F d. ₱200 U

28. Daly had a ₱18,000 favorable volume variance, a ₱15,000 unfavorable

variable overhead spending variance, and ₱12,000 total over-applied overhead. The fixed overhead
budget variance was

a. ₱9,000 F. b. ₱16,000 F. c. 49,000 U. d. ₱16,000 U.

Questions 29 and 30 are based on the following information.

Ultra Shine Company manufactures a cleaning solvent. The company employs both skilled and

unskilled workers. 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: 30.25 gallons @ ₱1.25 per gallon

Material B: 24.75 gallons @ ₱2.00 per gallon

Skilled Labor: 4 hours @ ₱12 per hour

Unskilled Labor: 2 hours @ ₱ 7 per hour

Actual:

Material A: 10,716 gallons purchased and used @ ₱1.50 per gallon

Material B: 17,484 gallons purchased and used @ ₱1.90 per gallon

Skilled labor hours: 1,950 @ ₱11.90 per hour

Unskilled labor hours: 1,300 @ ₱7.15 per hour

During the current month Ultra Shine Company manufactured 500 55-gallon drums.

29. The total materials yield variance is

a. ₱3,596 F b. ₱3,596 U c. ₱4,864 F d. ₱4,864 U

30. The total materials mix variance is

a. ₱1,111 U b. ₱1,111 F c. ₱2,670 U d. ₱2,670 F

31. The variance resulting from obtaining an output different from the one

expected on the basis of input is the:

a. mix variance b. usage variance c. yield variance d. efficiency variance

32. The sum of the material mix and material yield variances equals

a. the material purchase price variance. c. the total material variance.

b. the material quantity variance. d. none of the above.

33. The sum of the labor mix and labor yield variances equals

a. the labor efficiency variance.

b. the total labor variance.

c. the labor rate variance.

d. nothing because these two variances cannot be added since they use different costs.

34. A credit 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

35. A debit balance in a direct labor efficiency variance account indicates that:

A. actual total direct labor costs incurred were less than standard direct labor costs allowed for the units
produced

B. the number of units produced was less than the number of units budgeted for the period

C. the average wage rate paid to direct labor employees was less than the standard rate

D. the standard hours allowed for the units produced were less than actual direct labor hours

used