CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

ADVANCED FINANCIAL ACCOUNTING GERMAN/LIM/VALIX/K. DELA CRUZ/MARASIGAN

STANDARD COSTING

Part I: Theory of Accounts

1. Under Standard Costing System, direct material price variance shall be appropriately recorded or
computed
A. At the time of purchase
B. At the time of usage from raw materials to work in process
C. At the time of disposal of finished goods
D. At the time of conversion from work in process to finished goods

2. At the time of recording of material price variance, the material price variance account is
credited. Which of the following is correct?
A. The raw materials actually used are higher than the standard raw materials.
B. The actual price of raw materials is lower than the standard price of raw materials.
C. The raw materials actually used are lower than the standard raw materials.
D. The actual price of raw materials is higher than the standard price of raw materials.

3. If the raw material actual used are higher than the standard raw materials, the journal entry to
record the variance will include
A. Debit to material usage variance
B. Credit to material usage variance
C. Debit to material price variance
D. Credit to material price variance

4. At the time of recording of direct labor efficiency variance, the said variance account is debited.
Which of the following is correct?
A. The actual direct labor hours are higher than the standard direct labor hours.
B. The actual direct labor hours are lower than the standard direct labor hours.
C. The actual direct labor rate is higher than the standard direct labor rate.
D. The actual direct labor rate is lower than the standard direct labor rate.

5. If the actual direct labor rate is lower than the standard direct labor rate, the journal entry to
record the variance will include
A. Debit to direct labor efficiency variance
B. Credit to direct labor efficiency variance
C. Debit to direct labor rate variance
D. Credit to direct labor rate variance

6. Which of the following statements concerning the responsibility for direct material and direct
labor variances is incorrect?
A. As a general rule, material price variance is the responsibility of purchasing manager.
B. As a general rule, material usage variance is the responsibility of production manager.
C. As a general rule, direct labor rate variance is the responsibility of purchasing manager.
D. As a general rule, direct labor efficiency variance is the responsibility of production
manager.

7. If the company reports favorable material price variance and unfavorable material usage
variance, what is the most probable reason?
A. Acquisition of inexpensive/cheap but low-quality materials.
B. Acquisition of expensive but high-quality materials.
C. Hiring of experienced but highly paid laborers.
D. Hiring of inexperienced but lowly paid laborers.

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8. If the company reports unfavorable material price variance and favorable material usage
variance, what is the most probable reason?
A. Acquisition of inexpensive/cheap but low-quality materials.
B. Acquisition of expensive but high-quality materials.
C. Hiring of experienced but highly paid laborers.
D. Hiring of inexperienced but lowly paid laborers.

9. If the company reports favorable direct labor rate variance and unfavorable direct labor
efficiency variance, what is the most probable reason?
A. Acquisition of inexpensive/cheap but low-quality materials.
B. Acquisition of expensive but high-quality materials.
C. Hiring of experienced but highly paid laborers.
D. Hiring of inexperienced but lowly paid laborers.

10. If the company reports unfavorable direct labor rate variance and favorable direct labor
efficiency variance, what is the most probable reason?
A. Acquisition of inexpensive/cheap but low-quality materials.
B. Acquisition of expensive but high-quality materials.
C. Hiring of experienced but highly paid laborers.
D. Hiring of inexperienced but lowly paid laborers.

11. Which of the following statements concerning the responsibility for factory overhead variances
is incorrect?
A. Factory overhead efficiency variance is the responsibility of production manager.
B. Factory overhead variable spending variance is the responsibility of purchasing manager for
indirect materials or human resource manager for indirect labor.
C. Factory overhead fixed spending variance is the responsibility of purchasing manager.
D. Factory overhead volume variance is the responsibility of both production manager and
purchasing manager.

12. Which of the following factory overhead variances is pure variable?

A. Spending variance
B. Controllable variance
C. Efficiency variance
D. Volume variance

13. Which of the following factory overhead variances is pure fixed?

A. Spending variance
B. Controllable variance
C. Efficiency variance
D. Volume variance

14. In the computation of standard fixed factory overhead cost per labor hour, the total budgeted total
fixed factory overhead shall be divided using
A. Actual direct labor hours
B. Standard direct labor hours based on actual units produced
C. Normal capacity of production in labor hours
D. Actual direct labor hours last year

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Part II: Problem Solving

1. Standara Park Inc’s manufacturing projects for the month usually consumes 700 direct labor hours
paid at a rate of P400 per hour. Due to high demand for workers in the industry, some workers
resigned causing the projects to take longer to complete. A difference of 50 hours was noted when
compared to the standard. For the workers who chose to stay with the firm, their hourly rates were
increased to P500 per hour for this month.
The company uses standard costing to account for its manufacturing activities.

1. In the entry to record the labor cost incurred for the month, labor rate variance
will be ________________.
A. Debited for P20,000
B. Debited for P75,000
C. Credited for P20,000
D. Credited for P75,000

2. In the entry to record the labor cost incurred for the month, labor efficiency variance
will be _________________.
A. Debited for P20,000
B. Debited for P75,000
C. Credited for P20,000
D. Credited for P75,000

2. Standard Smith Corp. uses standard costing to account for its productions. During the month, it
purchased direct materials costing P530,000 and which were all converted into 10,000 units of
finished goods. Looking at the company standards, it normally takes 5 units of material purchased
at P11.50 per material to produce one unit of finished good. There was a favorable materials price
variance amounting to P15,000 for the month.
In the entry to record the requisitioning of material to production, materials usage
variance will be _______________.
A. Debited for P15,000
B. Debited for P30,000
C. Credited for P15,000
D. Credited for P30,000

3. Standarating Ang Manufacturing Inc. uses standard costing to account for its productions. The
following standards for its manufacturing process were made available:
 20 direct materials per finished goods
 P50 per unit of direct material
During the month, the company acquired 2,500 units of direct materials for P43 per unit. By the
end of the month, it was able to manufacture 150 finished goods by using 3,100 direct materials.

1. In the entry to record the purchase of material, materials price

variance will be _______________.
A. Debited for P5,000
B. Credited for P5,000
C. Debited for P17,500
D. Credited for P17,500

2. In the entry to record the requisitioning of material to production, materials usage

variance will be _______________.
A. Debited for P5,000
B. Credited for P5,000
C. Debited for P17,500
D. Credited for P17,500
END
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