Chapter 19 (MULTIPLE CHOICE QUESTIONS Throop Company had budgeted 50,000 units of output using 50,000 units of raw materials at a total material cost of P100,000. Actual output was 50,000 units of product, requiring 45,000 units of raw materials at a cost of P2.10 I price variance and usage variance were Usage P 10,000 favorable favorable P10,500 unfavorable 00 unfavorable P10,590 favorable 0,000 favorable 4,500 unfavorable (aicra) Rex Co.'s direct material costs for May is as follows: wateriols purchased andused..... _30,000 Ibs. Actual cost of direct materials Unfavorable direct materials usage variance Standard quantity of direct materials allowed for May production For the month of May, what was Rex's direct materials price varia! @. P2,800 favorable c. P6000 unfavorable b. 800 unfavorable d.__6,000 favorable Perkins Company, which has a standard cost system, had $00 units . inits inventory at June 1, purchased in May for P1.20 per uni carried at a standard cost of P1.00. The following information pe Gw material X for the month of June: Actual numt unis purchased Actual number of units used ndard number of units allowed for actual production jandard cost per unit ual cost per unit he unfavorable materials purchase price variance for raw material $ for P1490Standard Costing 4. During March, Younger Company's direct material co: of product T were as follows Actual unit purchase price Standard quantity allowed for actual production Quantity purchased and used for actual production Standard Unit price sen Younger's material usage variance for March. @. P1.250 unfavorable io b. 1,250 favorable J. 5. Buckler Company manufactures desks with vin} Cost for the vinyl used per Model S desk is P27. Vinyl at a cost of P2.25 per square foot. A produc March resulted in usage of 12,600 square feet of vinyl ata c: square foot, a total-cost of P25,200. The usage variance resulting fr above production run was . P1200 unfavorable . P1800 favorable b. 1.350 unfavorable d, 3,150 fo A company uses a standard cost sytem to account forits only pr materials standard per unit was 4 lbs. at P5.10 per Ib. Operating data Aptil were as follows: £800 Ibs. used P40) d units produced Number of fi The material us: jance for April was: a. -P1,020 favorable P1170 unfavorable b. 1,050 favorable d: 1/200 unfavorable (cay pany’s direct material costs is information on Kennedy Con Standard unit price ‘Actual quantity d 1,600 Standard quar ed for actual production 11450 Materials purchas 2 - favorable P 240Chapter 19 Theo at was the cetval purchase price per unit, rounded to the nearest cost centavo? a. P3.06 cc. P345 ' ban di -375 (AICPA) 11. Wha Chemtking uses a standard costing system in the manufacture of its single actu product. the 35,000 unis of raw material in inventory were purchased for allow 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. Compute for Chemking's: (1) standard price for one unit of material, and (2) the unils of material used to produce November output: ©. (1) P3.00; (2) 24,000units. _c. (1 P2.50: (2) 23,000 units b. (1) P2.50; (2) 25,000units —d._(1) P5.00; (2) 25,000 units ta og (CMa) ‘Yamaha Instruments established a standard cost for raw materials at P25 per unit. During the period just ended, a total of 10,000 units were putchased Of which 50% was at P2470 each, 20% was at P2490 each, and the balance was at P25.60 each. The raw materials cost variance fs a favorable (an unfavorable} a. P100 c. — P(100) 1 b. 900 d. (900) alge (Adopted) 10. Black Company manufactures only for specific orders and it uses a standard, Cost system. During one large order, an unusual number of kits were spoilec The normal spoilage is 10% of kits started. The point of first inspection is 1/3 through processing, the second inspection is 2/3 through processing, and the final inspection is at the end of processing in a continuous operation in a singlé department. Relevant data follow: 14, Mo Kits started = 1,000 Kits spoiled = 150 Materials introduced at the beginning, 200,000 Conversion costs for the job 400,000 Standard materials cost per kit 480 Standard conversi 3601019 Standard Costing The average point of spoilage is the 2/3 completion point. The total standard Cost of the spoiled kits wos: a. P21,000 c. P63,000 b. 27.000 d. 81,000 (Adapted) 11. What type of direct material variances for price and usage will arise if the actual number of pounds of materials used exceeds standard pounds allowed but actual cost was less than standard cost? Usage Price a. Unfavorable Favorable b. Favorable Favorable Favorable Unfavorable d. Unfavorable favorab (AICPA) 12, Anunfavorable price variance occurs bi Price increases on raw naterias. Price decreases on raw materials. ©. Less than anticipated levels of waste in the manufacturing process. d. More than anticipated process vels of waste in the manutacturit (icra) 13. Ifa company follows a practice of isolating variances at the earliest fin what would be the appropriate time to isolate and recognize a direct material price variance? a. When material is issued b. When material is purchased. ©. When material is used in production. d. When the purchase order is originated (Aicray eridls usage variances are normally chargeable to which department? a. Production c. Finished goods. b} Purchasing, d. Materials storage. (ca)1020 Chapter 19 15. Which of the following would least likely cause an unfavorable materials ‘quantity (usage) variance? ‘Materials that do not meet specifications. Machinery that has not been maintained propetly. Labor that possesses skils equal to those required by the standards Scheduling of substantial overtime. aoso (ca) 16. Todco planned to produced 3,000 units of its single product, Teragram, during November. The standard specifications for one unit of Teragram include sk pounds of material at P.30 per pound. Actual production in November was 3,100 units of Teragram. The accountant computed 6 favorable materials purchase price variance of P380 and an unfavorable materials quantity variance of P120. Based on these variances, one could 1 conclude that More materials were purchased that were used, More materials were used than were purchased. The actual cost of materials was less than the stondard cost. The actual usage of materials was less than the standard allowed. (CMA) ance 17. Information on Barber Company's direct labor costs for the month of Jonuary is as follows ‘Actual direct labor hours a 34,500 Standard direct labor HOUFS wn = ac 000) Total direct labor payroll oe 241,500 Direct labor efficiency variance - favorable... P3200 What is Barber's direct labor rate variance? a. P17.230 unfavorable . P21,000 unfavorable b. 20700 unfavorable d. 21,000 favorable (AICPA) ony's direct labor costs for the month of January were as follows 18. Lion Comp Actual direct labor hours : 20,000 Standard direct labor hours oe 21,000 Direct rate variance = (UNFAV.) wm P 3,000 is 126,000 Total pay Standard C Wh 19, The 20. at P was The Acc follo The. Ope Mardard Costing What was Lion's direct labor efficiency variance? a. P6000 favorable . P6300 favorable b. 6.150 favorable d. 6450 favorable (icra) The direct labor standards for producing a unit of a product are two hours at P10 per hour. Budgeted production was 1.000 units. Actual production was 900 units and direct labor cos! was P19,000 for 2,000 direct labor hours. The direct labor efficiency variance was a. P1,000 favorable ¢. P2,000 favorable b. 1,000 unfavorable d. 2,000 unfavorable (ca) ‘Acompany's direct labor costs for manufacturing its only product were as follows for October: standard direct labor hours per unit of product Number of finished units produced Standard rate per direct labor hour ‘Actual direct labor costs incured Actual rate per direct labor hour. The direct labor efficiency variance for October was a. P 2,500 favorable ¢. P.3,500 unfavorable b. 11,500 favorable d. 15000 unfavorable (cI Operational statistics generated for the period just ended for Apox Manufacturing Co., maker of a line of fumiture, follow: Standards per set: Material. : A 20 yds @ P100 Direc! abor Shr. @ 200 Actual results: Production... - - 20,000 sets Materials used .. “37,000 yds. ice peryard : P1O2 Direct labor hours used ... 9,000 hrs. Direct labor cost a 1,764,000Chapter 19 Standard The direct labor rate variance was: 25. Inf a. P36,000 favorable c. P4000 favorable b. 36,000 unfavorable d. 40,000 unfavorable (Adapted) Information on Westcott, Company's direct labor costs is as follows: Standard direct labor hours. A pees 510,000 Standard direct labor rate nnn ene a a75. ‘Actual direct labor rate P 3.50 Direct labor usage (efficiency) variance - unfaverabie .... P4200 What were the actual hours worked, rounded fo nearest hour? a. 10714 11.200 b. 11120 d. 1914 (AICPA) Tub Co. uses a standard cos! system. The following information pertains to direct labor for product B for the month of October: Standard hours alowed for actual production 2,000 ‘Actual rate paid per hour ..... 2 icmirmes P 8:40 Standard rate per hour ? P 8.00 Lobor efficiency variance «mn P1,600 U What were the actual hours worked? a. 1,800 c 2190 b. 1.810 d. 2200 (AICPA) ‘Thorp Co.'s records for Apil disclosed the folowing data relating to direct labor: Actual cost ee P10,000, Rate variance -n. 1,000 favorable Efficiency variance... 2 1,800 unfavorable Standard cost Actual direct labor hours for April amounted to 2,000. Thorp's standard direct labor rate per hour in April was a. P5.50 c. P75 b. 500 d. 450 (AICPA)1023 ‘Standard Costing 25. Information on Townsend Company's direct labor costs for May is as follows: Standard direct labor rate P 6.00 Actual direct labor rate aii P_ 5.80 Standard direct labor hours... 20,000 ‘Actual direct labor hours 21,000 Direct labor rate variance - favorable P 4200 What is Townsend's total direct labor payroll for May? a. P116,000 <. P120,000 b.° 117,600 d. 121,800 (aicre Biot, Inc. estimated the cost of a project it starled in October, 2011 as follows: direct materials, P495,000; direct labor, 6,000 hours at P30 per hour; variable overhead. P24 per direct labor hour. By the end of the month, all the requied materials have been used at P491,100; labor was 80% complete at 4,650 hours at P30 per hour; and, the variable overhead amounted to 113,700. The total variance for the project as at the end of the month was: @. P7.500 unfavorable c. 9,000 favorable b. 8,400 unfavorable d, 900 favorabi (Adapted) 27. Goodman Company's direct labor costs: Standard direct labor hours ‘Actual direct labor HOUFS sso Direct labor us age (efficiency) variance - favorabie Direct labor ¢ = variance - favorable Total payroll Compute the: (1) standard direct labor rate.a nd (2) actual direct labor rate: a. (1)P3.80; (2) P4009 c. (1) P3.54: (2) 3.80 b. (1) P4.00; 2) 3.80 cece (AICPA) 28. Sliver Company'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 fhat the unfavorable variable overhead variance was P40,000. Labor rouble caused anChapter 19 unfavorable labor efficiency variance of P120,000, and new employees hired at higher rates resulted in an actual average wage rate which was higher by 0.40 than the standard average wage rate per hour. The total number of standard direct labor hours allowed for the actual units produced is: 52,500 62,500 b. 60,000 d. 70,000 (Adapted) Cow, 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 budget variance was a favorable P3,400. The standard direct labor rate was P28.00 per hour, but on unexpected labor shortage necessitated the hiring of higher- aid workers for some jobs and had resulted in a rate variance of P800. The actual direct labor rate was: @. P2720 per hour c. P3025 perhour b. 2880 perhour 31.40 perhour (adopted) Toimprove productivity, St. Michael Corporation instituted a bonus plan where employees are paid 75% of the time saved when production performance exceeds the standard level of production. The company computes the bonus on the basis of four-week periods. The standard production is set at 3 units per hour. Each employee work 37 hours per week, and the wage rate is P24 per hour. Below are data for one 4-week period: Weekly Production (Units) Employee Ist 2nd 3d 4th ALAN 107, 100-0108 JOEL lof 110 SS ROMY 8 1120-12138 TONY 123-120. 119124 The employee who had inconsistent performance [sometimes performing below standard) but got a bonus is: a. Alan = P36 bonus ©. Romy =P126 bonus P54 bonus d. Tony =P252 bonus (Adapted)Standard Costing 31 32. Handel Co. provides for an incentive scheme for its factory worke features a guaranteed minimum wage and a piece rate. Ea: 1025 s which nh workers paid P1 1.25 per piece with a minimum guaranteed wage of P875.00/week Production records for a week show the following: What portion of the factory payroll for the v Units Produced to factory overhead? 2, b. P 75.00 cc. .P217.50 142.50 ad 292.50 (Adapted) How is a labor rate variance computed apgo Excess direct labor wages resulting from overtime premium will b dh hours The difference between standard andactuairate fimesstar 1e difference between standard and actualhouss times acivalrate The difference between standard and actual rate times actual hours The difference between standard and actual hours times the difference between standard and actual rate. in which type ofv. iance? a, b. An unfavorable labo ogo Yield ¢. Loborefficiency Quantity d. Loborrate (AICPA) iciency variance means that The actual labor rate was higher than the standard labor rate. The total labor variance must also be unfavorable. ‘Actual labor hours worked exceeded standard labor hours for the production level achieved. ‘Overtime labor was used during the period, (icra)35. Adebit balonce in the labor efficiency variance indicates that a, b. ce d. Stondard hours exceed actual hours. Actual hours exceed standard hours. Standard rate and standard hours exceed actual rate and actual hours. ‘Actualrate and actuaihours exceed standard rate and standard hous. (AICPA) 36. During the last3 months, a manufacturerincured an unfavorable laborefficiency variance. Which of the folowing is the least ikely cause of this variance? ased at a discount at a Substandard materials were pur supplier's liquidation. For one week only half of the work force, those with the highest seniotity, were called in to work. ‘A second production line with all new personnel was started. The cost-of-living adjustment for the 3-month period was P.10 more per hour than expected. (cla) 37. Whena change in the manufacturing process reduces the number of direct labor hour and standards are unchanged, the resulting variance will be aoge A favorable labor usage variance. ‘An unfavorable labor usage variance. ‘An unfavorable labor rate voriance. A favorable labor rate variance. (Cla) 38. Which of the following is the most probable reoson a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance? a b, The mix of workers assigned fo the particular job was heavily weighted toward the use of higher paid, experienced individuals. The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low paid unskilled workers. Because of the production schedule, workers from other production areas were assigned to assist this particular process. Defective materials caused more labor to be used in order to produce a standard unit laicra)29. 4l cia) sree! be 42, Standard Costing The difference between the actuallaborrate multipled by the actual hous worked ‘and the standard labor rate muliplied by the standard labor hours is the Total labor variance. Labor rate variance. Labor usage variance. Labor efficiency variance. ange (AICPA) Pale Manufacturing Co. hos an expected production level of 175,000 product Units for 2001. Fixed factory overhead is P450,000 and the company applies factory overhead on the basis of expected production level at the rate of 5.20 per uni. The variable overhead cost per unit is: a. P257 c. P293 b. 263 ad 302 (Adapted) Negros Co.'s factory overhead rate is pre-determined at the start of the fiscal period based on expecied actual production capacity. Budgeted factory overhead is P175,000 for ¢ normal capacity of 50,000 units and 225,000 for a maximum capacity of 75,000 units. At ihe beginning of 2008, the company forecasted a production of 60,000 units. For 2008, the factory ‘overhead rate per unit would be: % a. P275 eis b. 3.00 ad. 3.50 (Adapted) Phi Co. normally uses 40,000 direct labor hours for manufacturing 120.000 nits of product. Three units are producedin one hour, and the direct lanor roteisP15 perhour. Ai normal capacity of 40,000 hcuss, the factory overhead: is estimated as follows: Fixed overhead. en ta P100,000 Variable overhead... .- _120,000 Total overhead. 220,000 If 30,000 direct labor hours are used, total factory overhead costs would amount to: & P165,000 ¢. P195,000 b. 190,000 d. 220.000 (Adapted)1028 43, Blanco, Inc. provides computer processing services, and relevant up by the firm's management ore shown below: No. of pages per hour, 20. No. of hours per month, 500. Variable costs per hour, P30. Fixed costs per month, P10,000. For the month of May, 2011 12,000 pages are generated in 450 hours. The actual variable costs totalled P13,200, while the actual fixed costs equaled the estimated amouni. The folal standard cost for May was: a. P25,000 cc. P30,000 b. 27,500 d. 31,500 Adapted) The following direct manufacturing labor information pertains to the manufacture of product GI Time required io make one unit. Number of direct workers Number of productive hours per week: per work Weekly wages per worker Workers’ benefiis treated os direct manufacturing labor costs 20% of wages ‘What is the standard ditect manufacturing labor cost per unit of product Giu? P30 4 (AICPA) In connection with a standard cost system being developed by Flint Co. the following information is being considered with regard fo standard hours allowed for output of one unit of product: Hours Average historical performance for the past 3 years 185 Production level to satisfy average consumer demand ‘over a seasonal time span -agineering estimates based on attainable perforn Engineering estimates based on ideal performance