STANDARD COSTING
Set
TRUE OR FALSE: Write the word true if the statement is true otherwise write the word false
1.The total variance can provide useful information about the source of cost differences
2.The difference between the actual wages paid to employees and the standard wages for all hours
worked is the labor rate variance.
3. The difference between the standard hours worked for a specific level of production and the actual
hours worked is the labor rate variance.
4. A fixed overhead volume variance is a noncontrollable variance.
5.A one-variance approach calculates only a total overhead variance
6. Favorable variances are represented by credit balances in the overhead account.
7. Expected standards generally yield unfavorable variances.
8. Managers have no ability to control the budget variance.
9. If Actual purchase price is greater than standard purchase price, the result is a favorable material
purchase price variance.
10. A variance with a credit balance indicates a favorable performance
PROBLEM SOLVING: For variances, indicate whether favorable or unfavorable
(F)
ChemKing uses a standard costing system in the manufacture of its single product. The 35,000 units of raw
materials in inventory were purchased for P105,000 and two units of raw materials are required to produce
one unit of final product. In November 2017, the company produced 12,000 units of product. The standard
allowed for materials was P60,000 and there was an unfavorable quantity variance of 2,500.
1. ChemKIng’s standard price for one unit of materials is:
2. The units of materials used to produce November output totaled:
3. The material price variance for the units used in November was:
Nanjones Co manufactured a line of products distributed nationally through wholesalers. Presented
below are planned manufacturing data for 2017 and actual data for November 2017. The company
applies overhead based on planned machine hours using a predetermined annual rate:
2017 planning data
Annual November
Fixed manufacturing overhead P1,200,000 P100,000
Variable manufacturing overhead 2,400,000 220,000
Direct labor hours 48,000 4,000
Machine hours 240,000 22,000
Direct labor hours (actual) 4,200
Direct labor hours (plan based on output) 4,000
Machine hours (actual) 21,600
Machine hours (plan based on output) 21,000
Fixed manufacturing overhead 101,200
Variable manufacturing overhead 214,000
4. The predetermined overhead application rate for Nanjones Co for 2017:
5. The total amount of overhead applied to production for November 2017 was:
6. Information on Orman Company's direct labor costs is as follows:
Standard direct labor rate .............................................................................................. $3.75
Actual direct labor rate ................................................................................................... $3.50
Standard direct labor hours ............................................................................................ 10,000
Direct labor usage (efficiency) varianceCunfavorable .................................................... $ 4,200
What were the actual hours worked, rounded to the nearest hour?
The following information is for Crichton Company’s July production:
Standards:
Material 3.0 feet per unit @ $4.20 per foot
Labor 2.5 hours per unit @ $7.50 per hour
Actual:
Production 2,750 units produced during the month
Material 8,700 feet used; 9,000 feet purchased @ $4.50 per foot
Labor 7,000 direct labor hours @ $7.90 per hour
7. What is the labor efficiency variance?
. 8. What is the labor rate variance?
Genesis Company uses a standard cost system for its production process and applies overhead based on
direct labor hours. The following information is available for September when Genesis produced 5,000
units:
Standard:
DLH per unit 3.00
Variable overhead per DLH $1.80
Fixed overhead per DLH $3.25
Budgeted variable overhead $27,250
Budgeted fixed overhead $49,500
Actual:
Direct labor hours 16,000
Variable overhead $31,325
Fixed overhead $49,750
9. Using the two-variance approach, what is the controllable variance?
10. Using the two-variance approach, what is the noncontrollable variance?
