STRATEGIC BUSINESS ANALYSIS QUIZ #5 STANDARD COSTING DATE:

NAME: SCORE:

1. Which of the following statements about standard costs is false?

A. Properly set standards should promote efficiency.
B. Standard costs facilitate management planning.
C. Standards should not be used in "management by exception."
D. Standard costs can simplify the costing of inventories.
2. Which of the following statements is false?
A. A standard cost is more accurate than a budgeted cost.
B. A standard is a unit amount.
C. In concept, standards and budgets are essentially the same.
D. The standard cost of a product is equivalent to the budgeted cost per unit of product.

3. Ideal standards
A. are rigorous but attainable.
B. are the standards generally used in a master budget.
C. reflect optimal performance under perfect operating conditions.
D. will always motivate employees to achieve the maximum output.
4. A bill of material does not include
A. quantity of component inputs.
B. price of component inputs.
C. quality of component inputs.
D. type of product output.

5. A company wishing to isolate variances at the point closest to the point of responsibility will determine its
material price variance when
A. material is purchased. C. material is used in production.
B. material is issued to production. D. production is completed.

6. 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 Favorable Favorable Unfavorable No effect
Usage variance Favorable Unfavorable Favorable Unfavorable

7. The journal entry to record the direct materials quantity variance may be recorded
A. Only when direct materials are purchased
B. When inventory is taken at the end of the year.
C. Only when direct materials are issued to production
D. Either (A) or (C)
8. The variance resulting from obtaining an output different from the one expected on the basis of input is the:
A. efficiency variance C. usage variance
B. mix variance D. yield variance
9. An unfavorable labor efficiency variance
A. means that workers were inefficient, and their supervisor did a poor job.
B. causes a favorable variable overhead efficiency variance.
C. can result from an action taken by a manager other than the supervisor of the workers.
D. should always be investigated and corrected.
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1. MICHIGAN CORP. has a signature scarf for ladies that are very popular. Certain production and marketing data are
indicated below:
Cost per yard of cloth P36.00
Allowance for rejected scarf 5% of production
Yards of cloth needed per scarf 0.475 yard
Airfreight from supplier P0.60/yard
Motor freight to customers P0.90/yard
Purchase discounts from supplier 3%
Sales discount to customers 2%
The allowance for rejected scarf is not part of the 0.475 yard of cloth per scarf. Rejects have no market value.
Materials are used at the start of production.
Calculate the standard cost of cloth per scarf that Hankies Unlimited should use in its cost sheets.
A. P16.87 C. P17.76
B. P17.30 D. P18.21

2. The following direct labor information pertains to the manufacture of productGlu: Time required to
make one unit 2 direct labor hours
Number of direct workers 50
Number of productive hours per week, per worker 40
Weekly wages per worker P500
Workers’ benefits treated as direct labor costs 20% of wages
 What is the standard direct labor cost per unit of product Glu?
A. P12. C. P24.
B. P15. D. P30.

3. ALABAMA INC. uses a standard costing system in the manufacture of its single product. The 35,000 units of raw
material in inventory were purchased for P105,000, 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
P60,000, and there was an unfavorable quantity variance of P2,500. The materials price variance for the units used in
November was
A. P2,500 U C. P11,000 U
B. P3,500 F D. P12,500 U

4. VIRGINIA COMPANY has a standard cost system. In July the company purchased and used 22,500 pounds of direct
material at an actual cost of P53,000; the materials quantity variance was P1,875 Unfavorable; and the standard
quantity of materials allowed for July production was 21,750 pounds. The materials price variance for July was:
A. P2,725 F. C. P3,250 F.
B. P2,725 U. D. P3,250 U.

5. Cox Company's direct material costs for the month of January were as follows:
Actual quantity purchased 18,000 kilograms
Actual unit purchase price P3.60 per kilogram
Materials price variance – unfavorable (based on purchases) P3,600 Standard
quantity allowed for actual production 16,000 kilograms
Actual quantity used 15,000 kilograms
For January there was a favorable direct material quantity variance of
A. P3,360. C. P3,400.
B. P3,375. D. P3,800.

Use the following to answer questions 6 & 7:

The following data relate to product no. 89 of ARIZONA INC.
• Direct material standard: 3 square feet at P2.50 per square foot
• Direct material purchases: 30,000 square feet at P2.60 per square foot
• Direct material consumed: 29,200 square feet
• Manufacturing activity, product no. 89: 9,600 units completed

6. The direct-material quantity variance is:

A. P1,000F. D. P1,040U.
B. P1,000U. E. P2,000F.
C. P1,040F.

7. The direct-material price variance is:

A. P2,880U. D. P3,000F.
B. P2,920F. E. P3,000U.
C. P2,920U.

8. ALASKA CO. uses a standard cost system. Direct materials statistics for the month of May, 19x7 are summarize
below:
Standard unit price P90.00
Actual units purchased 40,000
Standard units allowed for actual production 36,250
Materials price variance- favorable P6,000
What was the actual purchase price per unit?
A. P75.00 C. P88.50
B. P85.89 D. P89.85

Questions 9 and 10 are based on the following information.

WASHINGTON CORP. has set a standard cost, P5.25 per unit for Material D and P12.25 per unit for Material E. In
June, Valenzuela bought 17,500 units of Material D and 8,750 units of Material E. All Material D, except 1,400 units
were bought at the standard unit cost. The 1,400 units had a unit cost of P6.15. WASHINGTON bought 7,875 units
of Material E at standard cost and 875 units at a unit cost of P14.
In accordance with the standard two units of Material D and one unit of Material E should be used to make each unit of
Product F. In January, 7,000 units of Product F were made and 15,050 units of Material D were used and 7,175 units
of Material E were used.

9. The total materials price variance is

A. P2,791.25 F C. P13,781.25 F
B. P2,791,25 U D. P13,781.25 U

10. The total materials quantity variance is

A. P7,656.25 F C. P13,781.25 F
B. P7,656.25 U D. P13,781.25 U

11. MINNESOTA CORP. has a maintenance shop where repairs to its motor vehicles are done. During last month’s labor
strike, certain recorded were lost. The actual input of direct labor hours was 1,000, and the resulting direct labor
budget 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 C. P30.25 per hour
B. P28.80 per hour D. P31.40 per hour

12. OREGON CORP.’s operations for the month just ended originally set up a 60,000 direct labor hour level, with budgeted
direct labor of P960,000 and budgeted variable overhead of P240,000. The actual results revealed that direct labor
incurred amounted to P1,148,000 and that the unfavorable variable overhead variance was P40,000. Labor trouble
caused an unfavorable labor efficiency variance of P120,000, and new employees hired at higher rates resulted in an
actual average wage rate of P16.40 per hour. The total number of standard direct labor hours allowed for the actual
units produced is
A. P52,500 C. P62,500
B. P60,000 D. P70,000

13. TENNESSEE INC. produces a product requiring 3 direct labor hours at P20.00 per hour. During January, 2,000
products are produced using 6,300 direct labor hours. Wild West’s actual payroll during January was P122,850. What
is the labor quantity variance?
A. P2,850 U C. P3,150 F
B. P6,000 F D. P6,000 U

14. MARYLAND INC. had a P18,000 favorable volume variance, a P15,000 unfavorable variable overhead spending
variance, and P12,000 total over-applied overhead. The fixed overhead budget variance was
A. P9,000 F. C. P16,000 U.
B. P16,000 F. D. 49,000 U.

15. MISSOURI INC. has total budgeted fixed costs of P75,000. Actual production of 19,500 units resulted in a P3,000
favorable volume variance. What normal capacity was used to determine the fixed overhead rate?
A. 16,500 C. 18,750
B. 17,590 D. 20,313

16. WISCONSIN CORP. used 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 P48,000
Fixed factory O/H P108,000
Total factory O/H per DLH P6.50
Actual data for January were as follows:
Direct labor hours worked 22,000
Total factory O/H P147,000
Standard DLH allowed for capacity attained 21,000
Using the two-way analysis of O/H variances, what is the budget (controllable) variance for January?
A. P3,000 F. C. P10,500 U.
B. P9,000 F. D. P13,500 U.

Problems 17 and 18 are based on the following information.

The INDIANA CANDY FACTORY has the following budgeted factory overhead costs: Budgeted fixed
monthly factory overhead costs P85,000 Variable factory
overhead P4.00 per direct labor hour
For the month of January, the standard direct labor hours allowed were 25,000. An analysis of the factory overhead
shows that in January, the factory had an unfavorable budget (controllable) variance of P3,500 and a favorable
volume variance of P1,200. The factory uses a two-way analysis of factory overhead variances.

17. The actual factory overhead incurred in January was

A. P103,500 C. P186,200
B. P181,500 D. P188,500

18. The applied factory overhead in January was

A. P103,500 C. P186,200
B. P183,800 D. P188,500

Questions 19 & 20 are based on the following information.

KENTUCKY CO. has a standard cost system in which manufacturing overhead is applied to units of product on the
basis of direct labor hours (DLHs). The following standards are based on 100,000 direct labor hours:
Variable overhead 2 DLHs @ P3 per DLH = P6 per unit
Fixed overhead 2 DLHs @ P4 per DLH = P8 per unit
The following information pertains operations during March:
Units actually produced 38,000
Actual direct labor hours worked 80,000
Actual manufacturing overhead incurred:
Variable overhead P250,000
Fixed overhead P384,000

19. For March, the variable overhead spending variance was:

A. P6,000 F. C. P12,000 U.
B. P10,000 U. D. P22,000 F.

20. For March, the fixed overhead volume variance was:

A. P80,000 F. C. P96,000 F.
B. P80,000 U. D. P96,000 U.