Standard costing system

D 1. Information about Sargent Company's direct material costs is as follows:

Standard unit price P3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price varianceCunfavorable P240

What was the actual purchase price per unit, rounded to the nearest centavo?
A. P3.06
B. P3.11
C. P3.45
D. P3.75

SUPPORTING CALCULATION:
P240 = 1,600 (x - P3.60)
1,600 x = P240 + P5,760
x = P3.75

C 2. Using the following symbols, which formula represents the calculation of the labor rate variance?

AH = Actual hours
SH = Standard hours allowed for actual production
AR = Actual rate
SR = Standard rate

A. SR(AH - SH)
B. AR(AH - SH)
C. AH(AR - SR)
D. SH(AR - SR)

C 3. Information on Orman Company's direct labor costs is as follows:

Standard direct labor rate P3.75
Actual direct labor rate P3.50
Standard direct labor hours 10,000
Direct labor usage (efficiency) varianceCunfavorable P 4,200

What were the actual hours worked, rounded to the nearest hour?
A. 11,914
B. 10,714
C. 11,120
D. 11,200

SUPPORTING CALCULATION:
P4,200 = P3.75 (x - 10,000)
P3.75 x = P4,200 + P37,500
x = 11,120
D 4. Each unit of Product 8in1 requires two direct labor hours. Employee benefit costs are treated as direct
labor costs. Data on direct labor are as follows:

Number of direct employees 25

Weekly productive hours per employee 30
Estimated weekly wages per employee P240
Employee benefits (related to weekly wages) 25%

The standard direct labor cost per unit of Product 8in1 is:

A. P8.00
B. P10.00
C. P12.00
D. P20.00
SUPPORTING CALCULATION:

P240 + .25(240) B
= P20 / unit
30  2
5.
J. R. Richard Company employs a standard absorption system for product costing. The standard
cost of its product is as follows:

Direct materials P14.50

Direct labor (2 direct labor hours x P8) 16.00
Manufacturing overhead (2 direct labor hours x P11) 22.00
Total standard cost P52.50

The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours.
Richard planned to produce 25,000 units each month during the year. The budgeted annual
manufacturing overhead is:

Variable P3,600,000
Fixed 3,000,000
P6,600,000

During November, Richard produced 26,000 units. Richard used 53,500 direct labor hours in November
at a cost of P433,350. Actual manufacturing overhead for the month was P250,000 fixed and
P325,000 variable.

The manufacturing overhead controllable variance for November is:

A. P9,000 unfavorable D. P4,000 favorable
B. P13,000 unfavorable
C. P9,000 favorable
SUPPORTING CALCULATION:
Actual factory overhead P 575,000
Budget allowance:
Variable factory overhead (52,000 x P6) P312,000
Budgeted fixed overhead 250,000 562,000
Controllable variance P 13,000 unfavorable

B 6. J. R. Richard Company employs a standard absorption system for product costing. The standard cost of
its product is as follows:

Direct materials P14.50

Direct labor (2 direct labor hours x P8) 16.00
Manufacturing overhead (2 direct labor hours x P11) 22.00
Total standard cost P52.50

The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours.
Richard planned to produce 25,000 units each month during the year. The budgeted annual
manufacturing overhead is:
Variable P3,600,000
Fixed 3,000,000
P6,600,000

During November, Richard produced 26,000 units. Richard used 53,500 direct labor hours in November
at a cost of P433,350. Actual manufacturing overhead for the month was P250,000 fixed and
P325,000 variable.
The manufacturing overhead volume variance for November is:
A. P12,000 unfavorable
B. P10,000 unfavorable
C. P3,000 unfavorable
D. P9,000 unfavorable

SUPPORTING CALCULATION:
Budget allowance based on standard hours allowed
[(52,000 x P6) + P250,000] P 562,000
Factory overhead applied at standard 572,000
Volume variance P (10,000) favorable

C 7. The following information relates to Department 1 of Ruiz Company for the fourth quarter. The total
overhead variance is divided into three variances: spending, variable efficiency, and volume.

Actual total overhead (fixed plus variable) P178,500

Budget formula P110,000 + P.50 per hour
 Total overhead application rate P1.50 per hour
Actual hours worked 121,000

What was the spending variance in this department during the quarter?
A. P8,000 favorable
B. P4,500 favorable
C. P8,000 unfavorable
D. P4,500 unfavorable

SUPPORTING CALCULATION:
Actual factory overhead P 178,500
Budget allowance:
Variable for actual hours
(121,000 x P.50) P 60,500
Fixed 110,000 170,500
Spending variance P 8,000 unfavorable

A 8. The following information relates to Department 1 of Ruiz Company for the fourth quarter. The total
overhead variance is divided into three variances: spending, variable efficiency, and volume.

Actual total overhead (fixed plus variable) P178,500

Budget formula P110,000 + P.50 per hour
Total overhead application rate P1.50 per hour
Actual hours worked 121,000
Standard hours allowed for production 130,000

What was the variable efficiency variance in this department during the quarter?
A. P4,500 favorable
B. P8,000 favorable
C. P4,500 unfavorable
D. P8,000 unfavorable

SUPPORTING CALCULATION:
Budget allowance for actual hours
[(121,000 x P.50) + P110,000] P 170,500
Budget allowance for standard hours:
Variable (130,000 x P.50) P 65,000
Fixed 110,000 175,000
Variable efficiency variance P (4,500) favorable

D 9. Information on Duke Co.'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 3,000
Standard quantity of direct materials allowed for May production 29,000 lbs.

For the month of May, Duke's direct materials price variance was:
A. P2,800 favorable
B. P2,800 unfavorable
C. P6,000 unfavorable
D. P6,000 favorable

SUPPORTING CALCULATION:
P3,000 = x (30,000 - 29,000)
1,000 x = P3,000
x = P3
y = P2.80 - P3.00(30,000)
y = (P6,000) favorable

A 10. A company uses a standard cost system to account for its only product. The materials standard per unit
was 4 lbs. at P5.10 per lb. Operating data for April were as follows:

Material used 7,800 lbs.

Cost of material used P40,950
Number of finished units produced 2,000

The material usage variance for April was:

A. P1,020 favorable
B. P1,050 favorable
C. P1,170 unfavorable
D. P1,200 unfavorable

SUPPORTING CALCULATION:

x = P5.10 [7,800 - (2,000 x 4)]

x = (P1,020) favorable

D 11. During the last three months, a manufacturer incurred an unfavorable labor efficiency variance. The least
likely cause of this variance is:
A. substantial materials were purchased at a discount at a previously unused supplier's liquidation
B. for one week, only half of the workforce, those with the highest seniority, were called in to work
C. a second production line with all new personnel was started
D. the cost-of-living adjustment for the three-month period was P.10 more per hour than expected

D 12. 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 cost was P19,000 for
2,000 direct labor hours. The direct labor efficiency variance was:
 A. P1,000 favorable
B. P1,000 unfavorable
C. P2,000 favorable
D. P2,000 unfavorable

SUPPORTING CALCULATION:

x = P10 [2,000 - (900 x 2)]

x = P2,000 unfavorable

D 13. Compute the variable efficiency variance, using the following data:

Standard labor hours per good unit produced 2

Good units produced 1,000
Actual labor hours used 2,100
Standard variable overhead per standard labor hour P3
Actual variable overhead P 6,500

A. P200 favorable
B. P200 unfavorable
C. P300 favorable
D. P300 unfavorable

SUPPORTING CALCULATION:

Variable budget allowance for actual hours (2,100 x P3) P 6,300

Variable budget allowance for standard hours
(P3 x 1,000 x 2) 6,000
P 300unfavorable