ABE INTERNATIONAL COLLEGE OF BUSINESS AND ACCOUNTANCY

URDANETA CITY – CAMPUS

MANAGEMENT ACCOUNTING

FINAL EXAMINATION

Direction: Choose the letter corresponds to the best answer. Write CAPITAL LETTER
ONLY for your answer.

1. A primary purpose of using a standard cost system is

A. To make things easier for managers in the production facility.

B. To provide a distinct measure of cost control.

C. To minimize the cost per unit of production.

D. b and c are correct

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

A. Standard costs are estimates of costs attainable only under the most ideal
conditions, but rarely practicable.

B. Standard costs are difficult to use with a process-costing system.

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

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

favorable variances need not be investigated.

3. Shampoo Company is a chemical manufacturer that supplies industrial users.

The company plans to introduce a new chemical solution and needs to develop a
standard product cost for this new solution.

The new chemical solution is made by combining a chemical compound (Nyclyn)

and a solution (Salex), boiling the mixture; adding a second compound (Protet),
and bottling the resulting solution in 20-liter containers. The initial mix, which is
20 liters in volume, consists of 24 kilograms of Nyclyn and 19.2 liters of Salex. A
20% reduction in volume occurs during the boiling process. The solution is then
cooled slightly before 10 kilograms of Protet are added; the addition of Protet
does not affect the total liquid volume.

The purchase prices of the raw materials used in the manufacture of this new
chemical solution are as follows:

NyclynP15.00 per kilogram

Salex P21.00 per liter

 Protet P28.00 per kilogram

The total standard materials cost of 20 liters of the product is:

A. P1,043.20 C. P 834.56

B. P1,304.00 D. P1,234.00

4. El Andre Co. uses a standard costing system in connection with the manufacture
of a line of T-shirts. Each unit of finished product contains 2.25 yards of direct
material. However, a 25 percent direct material spoilage calculated on input
quantities occurs during the manufacturing process. The cost of the direct
materials is P150 per yard. The standard direct material cost per unit of finished
product is

A. P 253 C. P 450

B. P 422 D. P 405

5. The Vandana Company has a signature scarf for ladies that is very popular.
Certain production and marketing data are indicated below:

Cost per yard of cloth P40.00

Allowance for rejected scarf 5% of production

Yards of cloth needed per scarf 0.475 yard

Airfreight from supplier P1.00/yard

Motor freight to customers P0.90 /scarf

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 Vandana Company should use
in its cost sheets.

A. P19.85 C. P19.40

B. P20.00 D. P19.90

6. Double M company is a chemical manufacturer that supplies various products to

industrial users. The company plans to introduce a new chemical solution called
Bysap, for which it needs to develop a standard product cost. The following
labor information is available on the production of Bysap.

• The product, which is bottled in 10-liter containers, is primarily a mixture

of Byclyn, Salex, and Protet.
 • The finished product is highly unstable, and one 10-liter batch out of six is
rejected at final inspection. Rejected batches have no commercial value and are
thrown out.

• It takes a worker 35 minutes to process one 10-liter batch of Bysap.

Employees work on eight-hour a day, including one hour per day for rest breaks
and cleanup.

What is the standard labor time to produce one 10-liter batch of Bysap?

A. 35 minutes C. 48 minutes

B. 40 minutes D. 45 minutes

7. Under a standard cost system, the materials quantity variance was recorded at
P1,970 unfavorable, the materials price variance was recorded at P3,740
favorable, and the Goods in Process was debited for P51,690. Ninety-six
thousand units were completed. What was the per unit price of the actual
materials used?

A. P0.52 each C. P0.54 each

B. P0.53 each D. P0.51 each

8. Blake Company has a standard price of P5.50 per pound for materials. July’s
results showed an unfavorable material price variance of P44 and a favorable
quantity variance of P209. If 1,066 pounds were used in production, what was
the standard quantity allowed for materials?

A. 1,104 C. 1,066

B. 1,074 D. 1,100

9. Elite Company 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. P 2,500 U C. P12,500 U

B. P11,000 U D. P 3,500 F

10.Sheridan Company has a standard of 15 parts of component BB costing P1.50

each. Sheridan purchased 14,910 units of component BB for P22,145. Sheridan
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. C. 1,000 units

B. 1,090 units. D. 1,160 units

 11.The standard usage for raw materials is 5 pounds at P40.00 per pound. Cave
Company spent P131,200 in purchasing 3,200 pounds. Cave used 3,150 pounds
to produce 600 units of finished product. The material quantity variance is:

A. P6,000 unfavorable C. P3,200 unfavorable

B. P5,200 unfavorable D. P2,000 unfavorable

12.The Bohol Company uses standard costing. The following data are available for
October:

Actual quantity of direct materials used 23,500 pounds

Standard price of direct materials P2 per pound

Material quantity variance P1,000 U

The standard quantity of materials allowed for October production is:

A. 23,000 lbs C. 24,000 lbs

B. 24,500 lbs D. 25,000 lbs

13.Information on Dulce’s direct material costs for May is as follows:

Actual quantity of direct materials purchased and used 30,000 lbs.

Actual cost of direct materials P84,000

Unfavorable direct materials usage variance P 3,000

Standard quantity of direct materials allowed for May production 29,000 lbs

For the month of May, Dulce’s direct materials price variance was:

A. P2,800 favorable C. P2,800 unfavorable

B. P6,000 unfavorable D. P6,000 favorable

14.The flexible budget for the month of May 2007 was for 9,000 units with direct
material at P15 per unit. Direct labor was budgeted at 45 minutes per unit for a
total of P81,000. Actual output for the month was 8,500 units with P127,500 in
direct material and P77,775 in direct labor expense. Direct labor hours of 6,375
were actually worked during the month. Variance analysis of the performance
for the month of May would show a(n):

A. Favorable material quantity variance of P7,500.

B. Unfavorable direct labor efficiency variance of P1,275.

C. Unfavorable material quantity variance of P7,500.

D. Unfavorable direct labor rate variance of P1,275.

 15.The standard hourly rate was P4.10. Standard hours for the level of production
are 4,000. The actual rate was P4.27. The labor rate variance was P654.50,
unfavorable. What were the actual labor hours?

A. 3,700 C. 3,850

B. 4,150 D. 4,000

16.The overhead variances for Big Company were:

Variable overhead spending variance: P3600 favorable.

Variable overhead efficiency variance: P6,000 unfavorable.

Fixed overhead spending variance: P10,000 favorable.

Fixed overhead volume variance: P24,000 favorable.

What was the overhead controllable variance?

A. P31,600 favorable C. P24,000 favorable

B. P13,600 favorable D. P 7,600 favorable

17.Kent Company sets the following standards for 2007:

Direct labor cost (2 DLH @ P4.50) P 9.00

Manufacturing overhead (2 DLH @ P7.50) 15.00

Kent Company plans to produce its only product equally each month. The annual
budget for overhead costs are:

Fixed overhead P150,000

Variable overhead 300,000

Normal activity in direct labor hours 60,000

In March, Kent Company produced 2,450 units with actual direct labor hours used of
5,050. Actual overhead costs for the month amounted to P37,245 (Fixed overhead is
as budgeted.)

The amount of overhead volume variance for Kent Company is

A. P250 unfavorable C. P500 unfavorable

B. P750 Unfavorable D. P375 Unfavorable

18.Calma Company uses a standard cost system. The following budget, at normal
capacity, and the actual results are summarized for the month of December:

Direct labor hours 24,000

Variable factory OH P 48,000

Fixed factory OH P108,000

 Total factory OH per DLH P 6.50

Actual data for December were as follows:

Direct labor hours worked 22,000

Total factory OH P147,000

Standard DLHs allowed for capacity attained 21,000

Using the two-way analysis of overhead variance, what is the controllable variance for
December?

A. P 3,000 Favorable C. P 5,000 Favorable

B. P 9,000 Favorable D. P10,500 Unfavorable

The Fire Company has a standard absorption and flexible budgeting system and uses a
two-way analysis of overhead variances. Selected data for the June production activity
are:

19.Budgeted fixed factory overhead costs P 64,000

Actual factory overhead 230,000

Variable factory overhead rate per DLH P 5

Standard DLH 32,000

Actual DLH 32,000

The budget (controllable) variance for June is

A. P1,000 favorable C. P1,000 unfavorable

B. P6,000 favorable D. P6,000 unfavorable

20.The following data are the actual results for Wow Company for the month of
May:

Actual output 4,500 units

Actual variable overhead P360,000

Actual fixed overhead P108,000

Actual machine time 14,000 MH

Standard cost and budget information for Wow Company follows:

Standard variable overhead rate P6.00 per MH

Standard quantity of machine hours 3 hours per unit

Budgeted fixed overhead P777,600 per year

Budgeted output 4,800 units per month

The overhead efficiency variance is

A. P3,000 Favorable C. P3,000 Unfavorable

B. P5,400 Favorable D. P5,400 Unfavorable

21.The Sacto Co.’s standard fixed overhead cost is P3 per direct labor hour based
on budgeted fixed costs of P300,000. The standard allows 2 direct labor hours
per unit. During 2006, Sacto produced 55,000 units of product, incurred
P315,000 of fixed overhead costs, and recorded P106,000 actual hours of direct
labor. What are the fixed overhead variances?

Spending variance Volume variance

A. P15,000 U P30,000 F

B. P33,000 U P30,000 F

C. P15,000 U P18,000 F

D. P33,000 U P18,000 F

22.Using the information in the preceding number, the amounts of controllable

variances for variable overhead are:

Spending Efficiency

A. P20,000 Fav P20,000 Unf

B. P20,000 Unf P20,000 Fav

C. P 5,000 Unf P20,000 Unf

D. P20,000 Fav P 5,000 Unf

Questions 23 and 24 are based on a monthly normal volume of 50,000 units (100,000
direct labor hours). Raff Co.’s standard cost system contains the following overhead
costs:

Variable P6 per unit

Fixed P8 per unit

The following information pertains to the month of March:

Units actually produced 38,000

Actual direct labor hours worked 80,000

Actual overhead incurred:

Variable P250,000

Fixed 384,000
 23.For March, the unfavorable variable overhead spending variance was:

A. P6,000 C. P12,000

B. P10,000 D. P22,000

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

A. P96,000U C. P80,000U

B. P96,000F D. P80,000F

The following information will be used to answer Question Nos. 25 through 28:

Garch, Inc. analyzes manufacturing overhead in the production of its only one product,
CD. The following set of information applies to the month of May, 2006:

Budgeted Actual

Units produced 40,000 38,000

Variable manufacturing OH P 4/DLH P16,400

Fixed manufacturing overhead P20/DLH P88,000

Direct labor hours 6 min/unit 4,200 hr

25.What is the fixed overhead spending variance?

A. P4,000 Favorable C. P8,000 Unfavorable

B. P8,000 Favorable D. P4,000 Unfavorable

26.What is the volume variance?

A. P4,000 Favorable C. P8,000 Favorable

B. P4,000 Unfavorable D. P8,000 Unfavorable

27.How much was the variable overhead spending variance?

A. P 400 Favorable C. P400 Unfavorable

B. P1,200 Favorable. D. P1,200 Unfavorable

28.How much overhead efficiency variance resulted for the month of May?

A. P1,600 Favorable C. P1,600 Unfavorable

B. P 800 Favorable D. P800 Unfavorable

29.Lone Star has computed the following unit costs for the year just ended:

Direct material used $12

Direct labor 18
 Variable manufacturing overhead 25

Fixed manufacturing overhead 29

Variable selling and administrative cost 10

Fixed selling and administrative cost 17

Under variable costing, each unit of the company's inventory would be carried at:

A. $35. B. $55. C. $65. D. $84.

30.Prescott Corporation has computed the following unit costs for the year just
ended:

Direct material used $18

Direct labor 27

Variable manufacturing overhead 30

Fixed manufacturing overhead 32

Variable selling and administrative cost 9

Fixed selling and administrative cost 17

Under absorption costing, each unit of the company's inventory would be carried at:

A. $75. B. $107. C. $116. D. $133

Use the following to answer questions 31- 32

Indiana Company incurred the following costs during the past year when planned
production and actual production each totaled 20,000 units:

Direct materials used $280,000

Direct labor 120,000

Variable manufacturing overhead 160,000

Fixed manufacturing overhead 100,000

Variable selling and administrative costs 60,000

Fixed selling and administrative costs 90,000

31.If Indiana uses variable costing, the total inventoriable costs for the year would
be:

A. $400,000. B. $460,000. C. $560,000. D. $620,000.

32.The per-unit inventoriable cost under absorption costing is:

A. $9.50. B. $25.00. C. $28.00. D. $33.00.

 33.Roberts, which began business at the start of the current year, had the following
data:

Planned and actual production: 40,000 units

Sales: 37,000 units at $15 per unit

Production costs:

Variable: $4 per unit

Fixed: $260,000

Selling and administrative costs:

Variable: $1 per unit

Fixed: $32,000

The gross margin that the company would disclose on an absorption-costing income
statement is:

A. $97,500. B.$147,000. C. $166,500. D. $370,000.

34.McAfee, which began business at the start of the current year, had the following
data:

Planned and actual production: 40,000 units

Sales: 37,000 units at $15 per unit

Production costs:

Variable: $4 per unit

Fixed: $260,000

Selling and administrative costs:

Variable: $1 per unit

Fixed: $32,000

The contribution margin that the company would disclose on an absorption-costing

income statement is:

A. $0. B. $147,000. C. $166,500. D. $370,000.

35.The following data relate to Lobo Corporation for the year just ended:

Sales revenue $750,000

Cost of goods sold:

Variable portion 370,000

Fixed portion 110,000

 Variable selling and administrative cost 50,000

Fixed selling and administrative cost 75,000

Which of the following statements is correct?

A. Lobo’s variable-costing income statement would reveal a gross margin of

$270,000.

B. Lobo’s variable costing income statement would reveal a contribution margin

of $330,000.

C. Lobo’s absorption-costing income statement would reveal a contribution

margin of $330,000.

D. Lobo’s absorption costing income statement would reveal a gross margin of

$330,000.

Use the following to answer questions 36-37:

Franz began business at the start of this year and had the following costs: variable
manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling
and administrative costs per unit, $2; and fixed selling and administrative costs,
$220,000. The company sells its units for $45 each. Additional data follow.

Planned production in units 10,000

Actual production in units 10,000

Number of units sold 8,500

There were no variances.

36.The net income (loss) under absorption costing is:

A. $(7,500). B. $9,000. C. $15,000. D. $18,000.

37.The net income (loss) under variable costing is:

A. $(7,500). B. $9,000. C. $15,000. D. $18,000.

38.Monex reported $65,000 of net income for the year by using absorption costing.
The company had no beginning inventory, planned and actual production of
20,000 units, and sales of 18,000 units. Standard variable manufacturing costs
were $20 per unit, and total budgeted fixed manufacturing overhead was
$100,000. If there were no variances, net income under variable costing would
be:

A. $15,000. B.$55,000. C. $65,000. D. $75,000.

39.Canyon reported $106,000 of net income for the year by using variable costing.
The company had no beginning inventory, planned and actual production of
50,000 units, and sales of 47,000 units. Standard variable manufacturing costs
were $15 per unit, and total budgeted fixed manufacturing overhead was
 $150,000. If there were no variances, net income under absorption costing
would be:

A. $52,000. B. $97,000. C. $106,000. D. $115,000.

40.For external-reporting purposes, generally accepted accounting principles require

that net income be based on:

A. absorption costing.

B. variable costing.

C. direct costing.

D. semivariable costing.

Prepared by:

JEFRE R. MACARAEG, CPA

Instructor 6

Verified By:

CHARMAINE NIDOY

OIC, DEAN