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THEORY A. normal costing is less appropriate for multiproduct firms

Basic concepts B. only normal costing can be used with absorption costing.
1. The best characteristics of a standard cost system is C. the two systems can show different overhead budget variances.
A. all variances from standard should be reviewed D. the two systems show different volume variances if standard hours do not equal actual
B. standard can pinpoint responsibility and help motivation hours.
C. all significant unfavorable variances should be reviewed
D. standard cost involves cost control which is cost reduction 7. If a company wishes to establish factory overhead budget system in which estimated costs can
be derived directly from estimates of activity levels, it should prepare a
2. Standard costs are used for all of the following except: A. Capital budget. C. Fixed budget.
A. controlling costs C. income determination B. Discretionary budget. D. Flexible budget.
B. forming a basis for price setting D. measuring efficiencies
8. Lanta Restaurant compares monthly operating results with a static budget. When actual sales
3. Standard costs are least useful for are less than budget, would Lanta usually report favorable variances on variable food costs
A. Determining minimum inventory levels C. Measuring production efficiency and fixed supervisory salaries.
B. Job order production systems D. Simplifying costing procedures A. B. C. D.
Variable food costs Yes Yes No No
4. To which of the following is a standard cost nearly like? Fixed supervisory salaries Yes No Yes No
A. Budgeted cost. C. Period cost.
B. Estimated cost. D. Product cost. 9. The primary difference between a fixed (static) budget and a variable (flexible) budget is that a
fixed budget:
5. A difference between standard costs used for cost control and budgeted costs A. includes only fixed costs; while variable budget includes only variable costs
A. Can exist because standard costs must be determined after the budget is completed. B. cannot be changed after the period begins; while a variable budget can be changed after
B. Can exist because budgeted costs are historical costs while standard costs are based on the period begins
engineering studies. C. is concerned only with future acquisitions of fixed assets; while a variable budget is
C. Can exist because establishing budgeted costs involves employee participation and concerned with expenses that vary with sales
standard costs do not. D. is a plan for a single level of sales (or other measure of activity); while a variable budget
D. Can exist because standard costs represent what costs should be while budgeted costs consists of several plans, one for each of several levels of sales (or other measure of
represent expected actual costs. activity)
6. Normal costing and standard costing differ in that 10. Standard costing will produce the same results as actual or conventional costing when

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standard cost variances are distributed to C. Employees will be strongly motivated to attain the standard
A. A balance sheet account C. Cost of goods sold D. Costs will be controlled better than if lower standards were used
B. An income or expense account D. Cost of goods sold and inventories
16. A predetermined overhead rate for fixed costs is unlike a standard fixed cost per unit in that a
11. Which of the following term is best identified with a system of standard cost? predetermined overhead rate is
A. Contribution approach. C. Marginal costing. A. likely to be higher than a standard fixed cost per unit.
B. Management by exception. D. Standard accounting system. B. used with variable costing while a standard fixed cost is used with absorption costing.
C. based on practical capacity and a standard fixed cost can be based on any level of
Standard setting activity.
12. Which one of the following terms best describes the rate of output which qualified workers can D. based on an input factor like direct labor hours and a standard cost per unit is based on a
achieve as an average over the working day or shift, without over-exertion, provided they unit of output.
adhere to the specified method of working and are well motivated in their work?
A. Standard hours C. Standard time 17. The variable factory overhead rate under the normal volume, practical capacity, and expected
B. Standard performance D. Standard unit activity levels would be the
A. Same except for expected capacity C. Same except for practical capacity
13. When standard costs are used in a process-costing system, how, if at all, are equivalent units B. Same except for normal volume D. Same for all three activity levels
of production (EUP) involved or used in the cost report at standard?
A. Equivalent units are not used. Materials & labor variances
B. Equivalent units are computed using a special approach. 18. For the doughnuts of McDonut Co. the Purchasing Manager decided to buy 65,000 bags of
C. The standard equivalent units are multiplied by the actual cost per unit. flour with a quality rating two grades below that which the company normally purchased. This
D. The actual equivalent units are multiplied by the standard cost per unit. purchase covered about 90% of the flour requirement for the period. As to the material
variances, what will be the likely effect?
14. The type of standard that is intended to represent challenging yet attainable results is: A. B. C. D.
A. controllable cost standard D. normal standard Price variance Favorable Favorable Unfavorable No effect
B. expected actual standard E. theoretical standard Usage variance Favorable Unfavorable Favorable Unfavorable
C. flexible budget standard
19. What type of direct material variances for price and usage will arise if the actual number of
15. A company using very tight standards in a standard cost system should expect that pounds of materials used was less than standard pounds allowed but actual cost exceeds
A. No incentive bonus will be paid standard cost?
B. Most variances will be unfavorable A. B. C. D.

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Usage Favorable Favorable Unfavorable Unfavorable Labor Rate Variance Favorable Favorable Unfavorable Unfavorable
Price Favorable Unfavorable Favorable Unfavorable Labor Efficiency Variance Favorable Unfavorable Favorable Unfavorable

20. The journal entry to record the direct materials quantity variance may be recorded 25. The variance resulting from obtaining an output different from the one expected on the basis of
A. Only when direct materials are purchased input is the:
B. When inventory is taken at the end of the year. A. efficiency variance C. usage variance
C. Only when direct materials are issued to production B. mix variance D. yield variance
D. Either (A) or (C)
Overhead variances
21. A manager prepared the following table by which to analyze labor costs for the month: 26. In the analysis of standard cost variances, the item which receives the most diverse treatment
Actual Hours at Actual Hours at Standard Hours at in accounting is
Actual Rate Standard Rate Standard Rate A. Direct labor cost C. Factory overhead cost
$10,000 $9,800 $8,820 B. Direct material cost D. Variable cost.
What variance was $980?
A. Labor efficiency variance. C. Labor spending variance. 27. The total overhead variance is
B. Labor rate variance. D. Volume variance. A. Based on actual hours worked for the units produced.
B. The difference between budgeted overhead and applied overhead.
22. A credit balance in the labor efficiency variance indicates that: C. The difference between actual overhead costs and applied overhead.
A. actual hours exceed standard hours D. The difference between actual overhead costs and budgeted overhead.
B. standard hours exceed actual hours
C. actual rate and actual hours exceed standard rate and standard hours 28. When expenses estimated for the capacity attained differ from the actual expenses incurred,
D. standard rate and standard hours exceed actual rate and actual hours the resulting balance is termed the
A. Activity variance. C. Unfavorable variance.
23. A debit balance in the labor efficiency variance indicates that B. Budget variance. D. Volume variance.
A. Actual hours exceed standard hours. C. Standard hours exceed actual hours.
B. Actual rate exceeds standard rate. D. Standard rate exceeds actual rate. 29. If a company uses a predetermined rate for absorption of manufacturing overhead, the volume
variance is
24. If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the A. The under- or over-applied fixed cost element of overhead.
number of hours allowed, the labor rate variance and labor efficiency variance will be B. The under- or over-applied variable cost element of overhead.
A. B. C. D. C. The difference between budgeted cost and actual cost of fixed overhead items.

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D. The difference between budgeted cost and actual cost of variable overhead items. Spending Variance Increased Increased Unchanged Unchanged
Volume Variance Increased Unchanged Increased Unchanged
30. The production volume variance occurs when using the
A. Absorption costing approach because of production exceeding the sales. 34. A spending variance for variable factory O/H based on direct labor hours is the difference
B. Variable costing approach because of sales exceeding the production for the period. between actual variable factory O/H and the variable factory O/H that should have been
C. Variable costing approach because of production exceeding the sales for the period. incurred for the actual hours worked. This variance results from
D. Absorption costing approach because production differs from that used in setting the fixed A. Price differences for overhead costs
overhead rate used in applying fixed overhead to production. B. Quantity differences for overhead costs
C. Price and quantity differences for overhead costs.
31. Henley Company uses a standard cost system in which it applies manufacturing overhead to D. Differences caused by production volume variation
units of product on the basis of direct labor hours. For the month of January, the fixed
manufacturing overhead volume variance was $2,220 favorable. The company uses a fixed Responsibility for variances
manufacturing overhead rate of $1.85 per direct labor hour. During January, the standard 35. Which department is typically responsible for a materials price variance?
direct labor hours allowed for the month's output: A. Engineering. C. Purchasing.
A. exceeded denominator hours by 1,000. C. fell short of denominator hours by 1,000. B. Production. D. Sales.
B. exceeded denominator hours by 1,200. D. fell short of denominator hours by 1,200.
36. Under a standard cost system, the materials efficiency variance are the responsibility of
32. Using the two-variance method for analyzing overhead, which of the following variances A. Production and industrial engineering. C. Purchasing and sales.
contains both variable and fixed overhead elements? B. Purchasing and industrial engineering. D. Sales and industrial engineering.
A. B. C. D.
Controllable (Budget) Variance Yes Yes Yes No 37. Which of the following people is most likely responsible for an unfavorable variable overhead
Volume Variance Yes Yes No No efficiency variance?
Efficiency Variance Yes No No No A. accountant C. purchasing agent
B. production supervisor D. supplier
33. During 1990, a department’s three-variance factory O/H standard costing system reported
unfavorable spending and volume variances. The activity level selected for allocating factory 38. Which of the following standard costing variances would be least controllable by a production
O/H to the product was based on 80% of practical capacity. If 100% of practical capacity had supervisor?
been selected instead, how would the reported unfavorable spending and volume variances A. Labor efficiency. C. Overhead efficiency.
have been affected? B. Materials usage. D. Overhead volume.
A. B. C. D.

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Investigating variances
39. Management scrutinizes variances because 44. Which of the following is the most probable reason a company would experience an
A. It is desirable under conventional knowledge on good management. unfavorable labor rate variance and a favorable efficiency variance?
B. Management needs to determine the benefits foregone by such variances. A. Defective materials caused more labor to be used to product a standard unit.
C. Management desires to detect such variances to be able to plan for promotions. B. Because of the production schedule, workers from other production areas were assigned
D. Management recognizes the need to know why variances happen to be able to make to assist in this particular process.
corrective actions and fairly reward good performers. C. The mix of workers assigned to the particular job was heavily weighted toward the use of
higher-paid, experienced individuals.
40. A company reported a significant materials efficiency variance for the month of January. All of D. The mix of workers assigned to the particular job was heavily weighted toward the use of
the following are possible explanations for this variance except new, relatively low-paid unskilled workers.
A. Cutting back preventive maintenance.
B. Processing a large number of rush orders. 45. You used predetermined overhead rates and the resulting variances when compared with the
C. Inadequately training and supervising the labor force. results using the actual rates were substantial. Production data indicated that volumes were
D. Producing more units than planned for in the master budget. lower than the plan by a large difference. This situation can be due to
A. Overhead costs being recorded as planned.
41. Which variance is LEAST likely to be affected by hiring workers with less skill than those B. Overhead being substantially composed of fixed costs.
already working? C. Overhead being substantially composed of variable costs.
A. Labor rate variance. C. Material use variance. D. Products being simultaneously manufactured in single runs.
B. Material price variance. D. Variable overhead efficiency variance.
46. Overapplied factory overhead results when
42. Which of the following unfavorable variances is directly affected by the relative position of a A. A plant is operated at less than its normal capacity.
production process on a learning curve? B. Factory overhead costs incurred are less than the costs charged to production.
A. Materials mix. C. Labor efficiency. C. Factory overhead costs incurred are greater than the costs charged to production.
B. Materials price. D. Labor rate. D. Factory overhead costs incurred are unreasonably large in relation to the number of units
produced.
43. Which one of the following would not explain an adverse direct labor efficiency variance?
A. A reduction in direct labor training
B. Poor scheduling of direct labor hours PROBLEMS
C. Unusually lengthy machine breakdowns Flexible budget
D. Setting standard efficiency at a level that is too low 1. Premised on past experience, Mayo Corp. adopted the following budgeted formula for

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estimating shipping expenses. The company’s shipments average 12 kilos per shipment. 3. The following direct labor information pertains to the manufacture of product Glu:
Shipping costs = P8,000 + (0.25 x kgs. shipped) Time required to make one unit 2 direct labor hours
Planned Actual Number of direct workers 50
Sales order 800 780 Number of productive hours per week, per worker 40
Shipments 800 820 Weekly wages per worker $500
Units shipped 8,000 9,000 Workers’ benefits treated as direct labor costs 20% of wages
Sales 240,000 288,000 What is the standard direct labor cost per unit of product Glu?
Total kilograms shipped 9,600 12,300 A. $12. C. $24.
The actual shipping costs for the month amounted to P10,500. The appropriate monthly B. $15. D. $30.
flexible budget allowance for shipping costs for purposes of performance evaluation would be
A. P10,250 C. P10,400 4. PALOS Manufacturing Co. has an expected production level of 175,000 product units for 19x7.
B. P10,340 D. P11,075 Fixed factory overhead is P450,000 and the company applies factory overhead on the basis of
expected production level at the rate of P5.20 per unit. The variable overhead cost per unit is
Standard setting A. P2.57 C. P2.93
2. Hankies Unlimited has a signature scarf for ladies that is very popular. Certain production and B. P2.63 D. P3.02
marketing data are indicated below:
Cost per yard of cloth P36.00 Materials variances
Allowance for rejected scarf 5% of production 5. ChemKing uses a standard costing system in the manufacture of its single product. The
Yards of cloth needed per scarf 0.475 yard 35,000 units of raw material in inventory were purchased for $105,000, and two units of raw
Airfreight from supplier P0.60/yard material are required to produce one unit of final product. In November, the company
Motor freight to customers P0.90 /scarf produced 12,000 units of product. The standard allowed for material was $60,000, and there
Purchase discounts from supplier 3% was an unfavorable quantity variance of $2,500. The materials price variance for the units
Sales discount to customers 2% used in November was
The allowance for rejected scarf is not part of the 0.475 yard of cloth per scarf. Rejects have A. $2,500 U C. $11,000 U
no market value. Materials are used at the start of production. B. $3,500 F D. $12,500 U
Calculate the standard cost of cloth per scarf that Hankies Unlimited should use in its cost
sheets. 6. The Porter Company has a standard cost system. In July the company purchased and used
A. P16.87 C. P17.76 22,500 pounds of direct material at an actual cost of $53,000; the materials quantity variance
B. P17.30 D. P18.21 was $1,875 Unfavorable; and the standard quantity of materials allowed for July production
was 21,750 pounds. The materials price variance for July was:

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A. $2,725 F. C. $3,250 F. Questions 10 and 11 are based on the following information.

B. $2,725 U. D. $3,250 U. Valenzuela Plastics Inc. has set a standard cost, P5.25 per unit for Material D and P12.25 per unit
for Material E. In June, Valenzuela bought 17,500 units of Material D and 8,750 units of Material E.
7. Cox Company's direct material costs for the month of January were as follows: All Material D, except 1,400 units were bought at the standard unit cost. The 1,400 units had a unit
Actual quantity purchased 18,000 kilograms cost of P6.15. Valenzuela bought 7,875 units of Material E at standard cost and 875 units at a unit
Actual unit purchase price $ 3.60 per kilogram cost of P14.
Materials price variance – unfavorable (based on purchases) $ 3,600 In accordance with the standard two units of Material D and one unit of Material E should be used
Standard quantity allowed for actual production 16,000 kilograms to make each unit of Product F. In January, 7,000 units of Product F were made and 15,050 units
Actual quantity used 15,000 kilograms of Material D were used and 7,175 units of Material E were used.
For January there was a favorable direct material quantity variance of
A. $3,360. C. $3,400. 10. The total materials price variance is
B. $3,375. D. $3,800. A. P2,791.25 F C. P13,781.25 F
B. P2,791,25 U D. P13,781.25 U
8. ALPHA Co. uses a standard cost system. Direct materials statistics for the month of May,
19x7 are summarize below: 11. The total materials quantity variance is
Standard unit price P90.00 A. P7,656.25 F C. P13,781.25 F
Actual units purchased 40,000 B. P7,656.25 U D. P13,781.25 U
Standard units allowed for actual production 36,250
Materials price variance- favorable P6,000 Labor variances
What was the actual purchase price per unit? 12. Pane Company's direct labor costs for April are as follows:
A. P75.00 C. P88.50 Standard direct labor hours 42,000
B. P85.89 D. P89.85 Actual direct labor hours 41,200
Total direct labor payroll $247,200
9. JKL Company has a standard of 15 parts of component X costing P1.50 each. JKL purchased Direct labor efficiency variance – favorable $3,840
14,910 units of component X for P22,145. JKL generated a P220 favorable price variance and What is Pane's direct labor rate variance?
a P3,735 favorable quantity variance. If there were no changes in the component inventory, A. $44,496 U C. $49,440 F
how many units of finished product were produced? B. $49,440 U D. $50,400 F
A. 994 units. C. 1,090 units.
B. 1,000 units D. 1,160 units 13. TAMARAW, Inc. has a maintenance shop where repairs to its motor vehicles are done. During
last month’s labor strike, certain recorded were lost. The actual input of direct labor hours was

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1,000, and the resulting direct labor budget variance was a favorable P3,400. The standard but got a bonus is
direct labor rate was P28.00 per hour, but an unexpected labor shortage necessitated the A. Alan = P36 bonus. C. Romy = P126 bonus.
hiring of higher-paid workers for some jobs and had resulted in a rate variance of P800. The B. Joel = P54 bonus. D. Tony = P252 bonus.
actual direct labor rate was
A. P27.20 per hour C. P30.25 per hour Overhead variances
B. P28.80 per hour D. P31.40 per hour 16. The following were among Gage Co.’s 2000 costs:
Normal spoilage $ 5,000
14. ACE Company’s operations for the month just ended originally set up a 60,000 direct labor Freight out 10,000
hour level, with budgeted direct labor of P960,000 and budgeted variable overhead of Excess of actual manufacturing costs over standard costs 20,000
P240,000. The actual results revealed that direct labor incurred amounted to P1,148,000 and Standard manufacturing costs 100,000
that the unfavorable variable overhead variance was P40,000. Labor trouble caused an Actual prime manufacturing costs 80,000
unfavorable labor efficiency variance of P120,000, and new employees hired at higher rates Gage’s 2000 actual manufacturing overhead was
resulted in an actual average wage rate of P16.40 per hour. The total number of standard A. $40,000 C. $55,000
direct labor hours allowed for the actual units produced is B. $45,000 D. $120,000
A. P52,500 C. P62,500
B. P60,000 D. P70,000 17. At the beginning of the year, Smith Inc. budgeted the following:
Units 10,000
15. To improve productivity, ST. MICHAEL Corp. instituted a bonus plan where employees are paid Sales $100,000
75% of the time saved when production performance exceeds the standard level of production. Minus:
The company computes the bonus on the basis of four-week periods. The standard Total variable expenses 60,000
production is set at 3 units per hour. Each employee works 37 hours per week, and the wage Total fixed expenses 20,000
rate is P24 per hour. Below are data for one 4-week period: Net income $ 20,000
Weekly Production (Units)
Employee 1st 2nd 3rd 4th Total Factory overhead:
ALAN 107 100 110 108 425 Variable $ 30,000
JOEL 104 110 115 115 444 Fixed 10,000
ROMY 108 112 112 133 465 There were no beginning inventories. At the end of the year, no work was in process, total
TONY 123 120 119 124 486 factory overhead incurred was $39,500, and underapplied factory overhead was $1,500.
Factory overhead was applied on the basis of budgeted unit production. How many units were
The employee who had the inconsistent performance (sometimes performing below standard) produced this year?

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A. 9,500. C. 10,000.
B. 9,875. D. 10,250. 21. TYD, Inc. reported the following data for 1996:
Actual hours 120,000
18. Daly had a $18,000 favorable volume variance, a $15,000 unfavorable variable overhead Denominator hours 150,000
spending variance, and $12,000 total over-applied overhead. The fixed overhead budget Standard hours allowed for output 140,000
variance was Fixed predetermined overhead rate P6 per hour
A. $9,000 F. C. $16,000 U. Variable predetermined overhead rate P4 per hour
B. $16,000 F. D. 49,000 U. TYD’s 1996 volume variance was
A. P60,000 favorable.
19. Universal Company uses a standard cost system and prepared the following budget at normal B. No volume variance.
capacity for the month of January: C. P60,000 under-applied.
Direct labor hours 24,000 D. P60,000 which is neither favorable nor under-applied.
Variable factory O/H $48,000
Fixed factory O/H $108,000 22. Peters Company uses a flexible budget system and prepared the following information for the
Total factory O/H per DLH $6.50 year
Percentage of total capacity
Actual data for January were as follows: 80% 90%
Direct labor hours worked 22,000 Direct labor hours 24,000 27,000
Total factory O/H $147,000 Variable factory O/H $48,000 $54,000
Standard DLH allowed for capacity attained 21,000 Fixed factory O/H $108,000 $108,000
Using the two-way analysis of O/H variances, what is the budget (controllable) variance for Total factory O/H rate per DLH $6.50 $6.00
January?
Peters operated at 80% capacity during the year but applied factory overhead based on the
A. $3,000 F. C. $10,500 U.
90% capacity level. Assuming that actual factory O/H was equal to the budgeted amount for
B. $9,000 F. D. $13,500 U.
the attained capacity, what is the amount of O/H variance for the year?
A. $6,000 over-absorbed. C. $6,000 under-absorbed.
20. JKL Co. has total budgeted fixed costs of P75,000. Actual production of 19,500 units resulted
B. $12,000 over-absorbed. D. $12,000 under-absorbed.
in a $3,000 favorable volume variance. What normal capacity was used to determine the fixed
overhead rate?
23. Patridge Company uses a standard cost system in which it applies manufacturing overhead to
A. 16,500 C. 18,750
units of product on the basis of direct labor hours. The information below is taken from the
B. 17,590 D. 20,313
company's flexible budget for manufacturing overhead:

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Percent of capacity 70% 80% 90% activity and cost data for May:
Direct labor hours 21,000 24,000 27,000 Number of units completed 45,000 units
Variable overhead $ 42,000 $ 48,000 $ 54,000 Standard direct labor-hours allowed per unit of product 1.5 DLHS
Fixed overhead 108,000 108,000 108,000 Budgeted direct labor-hours (denominator activity) 72,000 DLHS
Total overhead $150,000 $156,000 $162,000 Actual fixed overhead costs incurred $66,000
During the year, the company operated at exactly 80% of capacity, but applied manufacturing Volume variance $4,275 U
overhead to products based on the 90% level. The company's fixed overhead volume variance The fixed portion of the predetermined overhead rate is $0.95 per direct labor-hour.
for the year was:
A. $6,000 F. C. $12,000 F. 26. The amount of fixed overhead contained in the company's overhead flexible budget for May
B. $6,000 U. D. $12,000 U was:
A. $64,125. C. $68,400.
Problems 24 and 25 are based on the following information. B. $67,500. D. $70,275.
The MABINI CANDY FACTORY has the following budgeted factory overhead costs:
Budgeted fixed monthly factory overhead costs P85,000 27. The amount of fixed manufacturing overhead cost applied to work in process during May was:
Variable factory overhead P4.00 per direct labor hour A. $42,750. C. $62,700.
B. $61,725. D. $64,125.
For the month of January, the standard direct labor hours allowed were 25,000. An analysis of the
factory overhead shows that in January, the factory had an unfavorable budget (controllable)
28. The fixed overhead budget variance for May was:
variance of P3,500 and a favorable volume variance of P1,200. The factory uses a two-way
A. $2,400 F. C. $6,000 F.
analysis of factory overhead variances.
B. $2,400 U. D. $6,000 U.
24. The actual factory overhead incurred in January was
29. Web Company uses a standard cost system in which manufacturing overhead is applied to
A. P103,500 C. P186,200
units of product on the basis of machine hours. During February, the company used a
B. P181,500 D. P188,500
denominator activity of 80,000 machine hours in computing its predetermined overhead rate.
However, only 75,000 standard machine hours were allowed for the month's actual production.
25. The applied factory overhead in January was
If the fixed overhead volume variance for February was $6,400 unfavorable, then the total
A. P103,500 C. P186,200
budgeted fixed overhead cost for the month was:
B. P183,800 D. P188,500
A. $96,000. C. $100,000.
B. $98,600. D. $102,400.
Questions 26 thru 28 are based on the following information.
The Murray Company makes and sells a single product. The company recorded the following

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30. Given for the variable factory overhead of GHI Products, Inc.: P39,500 actual input at Variable overhead 2 DLHs @ $3 per DLH = $6 per unit
budgeted rate, P41,500 flexible budget based on standard input allowed for actual output, Fixed overhead 2 DLHs @ $4 per DLH = $8 per unit
P2,500 favorable flexible budget variance. Compute the spending variance. The following information pertains operations during March:
A. P500 favorable. C. P2,000 favorable. Units actually produced 38,000
B. P500 unfavorable. D. P2,000 unfavorable. Actual direct labor hours worked 80,000
Actual manufacturing overhead incurred:
31. The following information is available from the Tyro Company: Variable overhead $250,000
Actual factory O/H $15,000 Fixed overhead $384,000
Fixed O/H expenses, actual $7,200
Fixed O/H expenses, budgeted $7,000 33. For March, the variable overhead spending variance was:
Actual hours 3,500 A. $6,000 F. C. $12,000 U.
Standard hours 3,800 B. $10,000 U. D. $22,000 F.
Variable O/H rate per DLH $2.50
Assuming that Tyro uses a three-way analysis of O/H variances, what is the spending 34. For March, the fixed overhead volume variance was:
variance? A. $80,000 F. C. $96,000 F.
A. $200 U C. $750 U. B. $80,000 U. D. $96,000 U.
B. $750 F. D. $950 F
Total variance
32. At Overland Company, maintenance cost is exclusively a variable cost that varies directly with 35. KNOTTY, Inc. estimated the cost of a project it started in October 19x4 as follows: Direct
machine-hours. The performance report for July showed that actual maintenance costs totaled materials, P495,000; direct labor, 6,000 hours at P30 per hour; variable overhead, P24 per
$9,800 and that the associated spending variance was $200 unfavorable. If 8,000 direct labor hour. By the end of the month, all the required materials have been used at
machine-hours were actually worked during July, the budgeted maintenance cost per P491,900; labor was 80% complete at 4,650 hours at P30 per hour; and, the variable
machine-hour was: overhead amounted to P113,700. The total variance for the project as at the end of the month
A. $1.20. C. $1.25. was
B. $1.225. D. $1.275. A. P7,500 U C. P9,000 F
B. P8,400 U D. P9,100 F
Questions 33 & 34 are based on the following information.
Raff Co. has a standard cost system in which manufacturing overhead is applied to units of product 36. A defense contractor for a government space project has incurred $2,500,000 in actual design
on the basis of direct labor hours (DLHs). The following standards are based on 100,000 direct costs to date for a guidance system whose total budgeted design cost is $3,000,000. If the
labor hours: design phase of the project is 60% complete, what is the amount of the contractor's current

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overrun or savings on this design work? fixed factory O/H was $480,000, O/H was applied on the basis of 32,000 budgeted machine
A. $300,000 savings. C. $500,000 savings. hours, and budgeted variable factory O/H was $170,000, what were the actual machine hours
B. $500,000 overrun. D. $700,000 overrun. (AH) for the month?
A. 31,576 C. 32,000
37. SUPER Co. at normal capacity, operates at 600,000 labor hours with standard labor rate of B. 31,687 D. 32,424
P20 per hour. Variable factory overhead is applied at the rate of P12 per labor hour. Four
units should be completed in an hour. 41. ABC Company uses the equation P300,000 + P1.75 per direct labor hour to budget
Last year, 1,350,000 units were produced using 300,000 labor hours. All labor hours were manufacturing overhead. ABC has budgeted 125,000 direct labor hours for the year. Actual
paid at the standard rate, and actual overhead cost consisted of P3,738,000 for variable items results were 110,000 direct labor hours, P297,000 fixed overhead, and P194,500 variable
and P3,000,000 fixed items. overhead. What is the fixed overhead volume variance for the year?
The total labor and overhead costs saved, by producing at more than standard, amounted to A. P2,000 F C. P35,000 U.
A. P450,000 C. P750,000 B. P3,000 F D. P36,000 U.
B. P500,000 D. P1,200,000
Comprehensive
Normal costing Questions 42 and 43 are based on the following information.
38. Nil Co. uses a predetermined factory O/H application rate based on direct labor cost. For the Based on normal capacity operations, Sta. Ana Company employs 25 workers in its Refining
year ended December 31, Nil’s budgeted factory O/H was $600,000, based on a budgeted Department, working 8 hours a day, 20 days per month at a wage rate of P6 per hour. At normal
volume of 50,000 direct labor hours, at a standard direct labor rate of $6 per hour. Actual capacity, production in the department is 5,000 units per month. Indirect materials average P0.25
factory O/H amounted to $620,000, with actual direct labor cost of $325,000. For the year, per direct labor hour; indirect labor cost is 12½% of direct labor cost; and other overhead are P0.15
over-applied factory O/H was per direct labor hour.
A. $20,000 C. $30,000 The flexible budget at the normal capacity activity level follows:
B. $25,000 D. $50,000 Direct materials P 4,000
Direct labor 24,000
39. MNO Company applies overhead at P5 per direct labor hour. In March 2001, MNO incurred Fixed factory overhead 1,200
overhead of P120,000. Under applied overhead was P5,000. How many direct labor hours Indirect materials 1,000
did MNO work? Indirect labor 3,000
A. 25,000 C. 24,000 Other overhead 600
B. 22,000 D. 23,000 Total P 33,800
Cost per unit P 6.76
40. Margolos, Inc. ends the month with a volume variance of $6,360 unfavorable. If budgeted

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42. The cost per unit at 60% capacity is 19. B 44. C 19. A
A. P6.00 C. P6.82 20. C 45. B 20. C
B. P6.50 D. P6.92 21. A 46. B 21. C
22. B 22. D
43. The total production cost for one month at 80% capacity is 23. A 23. D
A. P20,760 C. P27,280 24. D 24. D
B. P21,500 D. P30,160 25. D 25. C

ANSWER KEY
Theory Problem
1. B 26. C 1. D 26. C
2. C 27. C 2. C 27. D
3. A 28. B 3. D 28. A
4. A 29. A 4. B 29. D
5. D 30. D 5. D 30. A
6. D 31. B 6. C 31. B
7. D 32. C 7. C 32. A
8. B 33. C 8. D 33. B
9. D 34. C 9. D 34. D
10. D 35. C 10. B 35. D
11. B 36. A 11. B 36. D
12. B 37. B 12. B 37. D
13. D 38. D 13. B 38. C
14. D 39. D 14. C 39. D
15. B 40. D 15. C 40. A
16. D 41. B 16. A 41. D
17. D 42. C 17. A 42. D
18. B 43. D 18. A 43. C

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