PROBLEMS:
Standard setting
Raw Materials
. 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: Nyclyn P15.00 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 . 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

. Each finished unit of Product EM contains 60 pounds of raw material. The manufacturing process must provide for a 20% waste allowance. The raw material can be purchased for P2.50 a pound under terms of 2/10, n/30. The company takes all cash discounts. The standard direct material cost for each unit of EM is: A. P180.00 C. P187.50 B. P183.75 D. P176.40

. 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

Direct labor
. 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

. The following direct labor information pertains to the manufacture of Part J35: Number of hours required to make a part 2.5 DLH Number of Direct workers 75 Number of total productive hours per week 3000 Weekly wages per worker P1,000 Laborers’ fringe benefits treated as direct labor costs 25% of wages
What is the standard direct labor cost per unit of Part J35? A. P62.500 C. P41.670 B. P78.125 D. P84.125

Materials & Labor
Questions Nos. 7 and 8 are based on the following:
Supercold Company is a small producer of fruit-flavored frozen desserts. For many years, Supercold’s products have had strong regional sales on the basis of brand recognition. However, other companies have begun marketing similar products in the area, and price competition has become increasingly important. Haydee Mejia, the company’s controller, is planning to implement a standard costing system for Supercold and has gathered considerable information on production and material requirements for Supercold’s products. Haydee believes that the use of standard costing will allow Supercold to improve cost control and make better pricing decisions.

Supercold’s most popular products is strawberry sherbet. The sherbet is produced in 10-gallon batches, and each batch requires six quarts of good strawberries. The fresh strawberries are sorted by hand before entering the production process. Because of imperfections in the strawberries and normal spoilage, one quart of berries is discarded for every four quarts of acceptable berries. Three minutes is the standard direct labor time for sorting that is required to obtain one quart of acceptable berries. The acceptable berries are then blended with the other ingredients; blending requires 12 minutes of direct labor time per batch. After blending, the sherbet is package in quart containers. Haydee has gathered the following information from Rizza Alano, Supercold’s cost accountant.

Supercold purchases strawberries at a cost of P8.00 per quart. All other ingredients cost a total of P4.50 per gallon.
Direct labor is paid at the rate of P50 per hour.
The total cost of material and labor required to package the sherbet is P3.80 per quart.

Rizza Alano has a friend who owns a berry farm that has been losing money in recent years. Because of good crops, there has been an oversupply of strawberries, and prices have dropped to P5.00 per quart. Rizza has arranged for Supercold to purchase strawberries form her friend and hopes that P8.00 per quart will help her friend’s farm become profitable again.

. The standard materials cost per 10-gallon batch of strawberry sherbet is: A. P 85.00 C. P101.00 B. P 60.00 D. P105.00

. The standard direct labor cost per 10-gallon batch of sherbet is: A. P50.00 C. P25.00 B. P28.75 D. P15.00

Materials variance
. 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 eac B. P0.53 each D. P0.51 each

. 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

. 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

. 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

. 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

. 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

. 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

. Information on Katrina Company’s direct material costs is as follows: Standard unit price P 3.60 Actual quantity purchased 1,600 Standard quantity allowed for actual production 1,450 Materials purchase price variance – favorable P 240
What was the actual purchase price per unit, rounded to the nearest centavos? A. P3.06 C. P3.11 B. P3.45 D. P3.75

. Palmas Company, which has a standard cost system, had 500 units of raw material X in its inventory at June 1, purchased in May for P1.20 per unit and carried at a standard cost of P1.00. The following information pertains to raw material X for the month of June: Actual number of units purchased 1,400 Actual number of units used 1,500 Standard number of units allowed for actual production 1,300 Standard cost per unit P1.00 Actual cost per unit P1.10
The unfavorable materials purchase price variance for raw material X for June was: A. P 0 C. P140 B. P130 D. P150

. During March, Lumban Company’s direct material costs for the manufacture of product T were as follows: Actual unit purchase price P6.50 Standard quantity allowed for actual production 2,100 Quantity purchased and used for actual production 2,300 Standard unit price P6.25
Lumban’s material usage variance for March was: A. P1,250 unfavorable C. P1,250 favorable B. P1,300 unfavorable D. P1,300 favorable

. Razonable Company installs shingle roofs on houses. The standard material cost for a Type R house is P1,250, based on 1,000 units at a cost of P1.25 each. During April, Razonable installed roofs on 20 Type R houses, using 22,000 units of material cost of P26,400. Razonable’s material price variance for April is: A. P1,000 favorable C. P1,100 favorable B. P1,400 unfavorable D. P2,500 unfavorable

. Samson Candle Co. manufactures candles in various shapes, sizes, colors, and scents. Depending on the orders received, not all candles require the same amount of color, dye, or scent materials. Yields also vary, depending upon the usage of beeswax or synthetic wax. Standard ingredients for 1,000 pounds of candles are: Input: | Standard Mix | Standard Cost per Pound | Beeswax | 200 lbs. | 1.00 | Synthetic wax | 840 lbs. | 0.20 | Colors | 7 lbs. | 2.00 | Scents | 3 lbs. | 6.00 | Totals | 1,050 lbs. | 9.20 | Standard output | 1,000 lbs. | |
Price variances are charged off at the time of purchase. During January, the company was busy manufacturing red candles for Valentine’s Day. Actual production then was: Input: In Pounds Beeswax 4,100 Synthetic wax 13,800 Colors 2,200 Scents 60 Total 20,160 Actual output 18,500
The material yield variance is: A. P 280 unfavorable C. P 280 favorable B. P3,989 unfavorable D. P3,989 favorable

Labor variance
. 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. . 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

. Clean Harry Corp. uses two different types of labor to manufacture its product. The types of labor, Mixing and Finishing, have the following standards: Labor Type | Standard Mix | Std Hourly Rate | Standard Cost | Mixing | 500 hours | P10 | P5,000 | Finishing | 250 hours | P 5 | P1,250 | Yield: | 4,000 units | | |
During January, the following actual production information was provided: Labor Type | Actual Mix | Mixing | 4,500 hours | Finishing | 3,000 hours | Yield: | 36,000 units |
What is the labor mix variance? A. P2,500 F C. P2,500 U B. P5,000 F D. P5,000 F

. How much labor yield variances should be reported? A. P6,250 U C. P5,250 F B. P6,250 F D. P5,250 U

. Hingis had a P750 unfavorable direct labor rate variance and an P800 favorable efficiency variance. Hingis paid P7,150 for 800 hours of labor. What was the standard direct labor wage rate? A. P8.94 C. P8.00 B. P7.94 D. P7.80

. Powerless Company’s operations for April disclosed the following data relating to direct labor: Actual cost P10,000 Rate variance 1,000 favorable Efficiency variance 1,500 unfavorable Standard cost P 9,500
Actual direct labor hours for April amounted to 2,000. Powerless’ standard direct labor rate per hour in April was: A. P5.50 C. P5.00 B. P4.75 D. P4.50

. Lion Company’s direct labor costs for the month of January were as follows: Actual direct labor hours 20,000 Standard direct labor hours 21,000 Direct labor rate variance – Unfav. P 3,000 Total payroll P126,000
What was Lion’s direct labor efficiency variance? A. P6,000 favorable C. P6,150 favorable B. P6,300 favorable D. P6,450 favorable

. Using the information given below, determine the labor efficiency variance: Labor price per hour P 20 Standard labor price per gallon of output at 20 gal./hr P 1 Standard labor cost of 8,440 gallons of actual output P8,440 Actual total inputs(410 hours at P21/hr) P8,610 A. P 410 unfavorable C. P 240 favorable B. P 170 unfavorable D. P 410 favorable

. Simbad 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 that the unfavorable variable overhead variance was P40,000. Labor trouble caused an unfavorable labor efficiency variance of P120,000, and new employees hired at higher rates resulted in an actual average wage rate of P16.40 per hour. The total number of standard direct labor hours allowed for the actual units produced is A. P52,500 C. P62,500 B. P77,500 D. P70,000

Questions 30 and 31 are based on the following information.
Information on Goodeve Company’s direct labor costs are presented below: Standard direct labor hours 30,000 Actual direct labor hours 29,000 Direct labor efficiency variance Favorable P 4,000 Direct labor rate variance Favorable P 5,800 Total payroll P110,200

. What was Goodeve’s standard direct labor rate? A. P3.54 C. P3.80 B. P4.00 D. P5.80

. What was Goodeve’s actual direct labor rate? A. P3.60 C. P3.80 B. P4.00 D. P5.80

. The Islander Corporation makes a variety of leather goods. It uses standards costs and a flexible budget to aid planning and control. Budgeted variable overhead at a 45,000-direct labor hour level is P27,000.
During April material purchases were P241,900. Actual direct-labor costs incurred were P140,700. The direct-labor usage variance was P5,100 unfavorable. The actual average wage rate was P0.20 lower than the average standard wage rate.
The company uses a variable overhead rate of 20% of standard direct-labor cost for flexible budgeting purposes. Actual variable overhead for the month was P30,750.
What were the standard hours allowed during the month of April? A. 50,250 C. 58,625 B. 48,550 D. 37,520

. Information on Barber Company’s direct labor costs for the month of January is as follows: Actual direct labor hours 34,500 Standard direct labor hours 35,000 Total direct labor payroll P241,500 Direct labor efficiency variance – favorable P 3,200
What is Barber’s direct labor rate variance? A. P17,250 U C. P21,000 U B. P20,700 U D. P21,000 F

. STA Company uses a standard cost system. The following information pertains to direct labor costs for the month of June: Standard direct labor rate per hour P 10.00 Actual direct labor rate per hour P 9.00 Labor rate variance (favorable) P12,000 Actual output (units) 2,000 Standard hours allowed for actual production 10,000 hours
How many actual labor hours were worked during March for STA Company? A. 10,000 C. 8,000 B. 12,000 D. 10,500

. Information of Hanes’ direct labor costs for the month of May is as follows: Actual direct labor rate P7.50 Standard direct labor hours allowed 11,000 Actual direct labor hours 10,000 Direct labor rate variance – favorable P5,500
What was the standard direct labor rate in effect for the month of May? A. P6.95 C. P8.00 B. P7.00 D. P8.05

Two-way overhead variance
. 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

. 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

. 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

. Heart Company uses a flexible budget system and prepared the following information for the year: Percent of Capacity | 80 Percent | 90 Percent | Direct labor hours | 24,000 | 27,000 | Variable factory overhead | P 54,000 | P 60,750 | Fixed factory overhead | P 81,000 | P 81,000 | Total factory overhead rate per DLH | P5.625 | P5.25 |
Heart operated at 80 percent of capacity during the year, but applied factory overhead based on the 90 percent capacity level. Assuming that actual factory overhead was equal to the budgeted amount of overhead, how much was the overhead volume variance for the year? A. P 9,000 unfavorable C. P 9,000 favorable B. P15,750 unfavorable D. P15,750 favorable

. 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: Budgeted fixed factory overhead costs P 64,000 Actual factory overhead 230,000 Variable factory overhead rater 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

. Sorsogon Company had actual overhead of P14,000 for the year. The company applied overhead of P13,400. If the overhead budgeted for the standard hours allowed is P15,600, the overhead controllable variance is A. P 600 Favorable C. P1,600 Favorable B. P2,200 Unfavorable D. P1,600 Unfavorable

. Compo Co. uses a predetermined factory O/H application rate based on direct labor cost. For the year ended December 31, Compo’s budgeted factory O/H was P600,000, based on a budgeted volume of 50,000 direct labor hours, at a standard direct labor rate of P6 per hour. Actual factory O/H amounted to P620,000, with actual direct labor cost of P325,000. For the year, over-applied factory O/H was A. P20,000 C. P30,000 B. P25,000 D. P50,000

. The Terrain 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: Budgeted fixed factory overhead costs P 64,000 Actual factory overhead 230,000 Variable factory overhead rater per DLH P 5 Standard DLH 32,000 Actual DLH 32,000
The budget (controllable) variance for the month of June is: A. P1,000 favorable C. P1,000 unfavorable B. P6,000 favorable D. P6,000 unfavorable

. The standard factory overhead rate is P10 per direct labor hour (P8 for variable factory overhead and P2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows: Standard: 25,000 hours at P10 P250,000 Actual: Variable factory overhead 202,500 Fixed factory overhead 60,000
What is the amount of the factory overhead volume variance? A. 12,500 favorable C. 12,500 unfavorable B. 10,000 unfavorable D. 10,000 favorable

Three-way overhead variance
. 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

. The Libiran Company produces its only product, Menthol Chewing Gum. The standard overhead cost for one pack of the product follows: Fixed overhead (1.50 hours at P18.00) P27.00 Variable overhead (1.50 hours at P10.00) 15.00 Total application rate P42.00
Libiran uses expected volume of 20,000 units. During the year, Libiran used 31,500 direct labor hours for the production of 20,000 units. Actual overhead costs were P545,000 fixed and P308,700 variable.
The overhead efficiency variance is A. P22,500 Favorable C. P15,000 Favorable B. P22,500 Unfavorable D. P15,000 Unfavorable

. Abbey Company produces a single product. Abbey employs a standard cost system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Abbey used a standard overhead rate equal to P8.50 per direct labor hour. The rate was computed using normal activity. Budgeted overhead costs are P100,000 for 10,000 direct labor hours and P160,000 for 20,000 direct labor hours. During the past year, Abbey generate the following data:
Actual production: 1,400 units
Fixed overhead volume variance: P5,000 U
Variable overhead efficiency variance: P3,000 F
Actual fixed overhead costs: P42,670
Actual variable overhead costs: P82,000
The number of direct labor hours used as normal activity are: A. 16,000 C. 14,000 B. 15,000 D. 13,500

. Using the information presented below, calculate the total overhead spending variance. Budgeted fixed overhead P10,000 Standard variable overhead (2 DLH at P2 per DLH) P4 per unit Actual fixed overhead P10,300 Actual variable overhead P19,500 Budgeted volume (5,000 units x 2 DLH) 10,000 DLH Actual direct labor hours (DLH) 9,500 Units produced 4,500 A. P 500 U C. P1,000 U B. P 800 U D. P1,300 U

. The following data are the actual results for Bustos 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 Bustos 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 unit per month
The overhead efficiency variance is: A. P3,000 Favorable C. P3,000 Unfavorable B. P5,400 Favorable D. P5,400 Unfavorable

. The following information is available from the Tyro Company: Actual factory overhead P15,000 Fixed overhead expenses, actual P 7,200 Fixed overhead expenses, budgeted P 7,000 Actual hours 3,500 Standard hours 3,800 Variable overhead rate per DLH P 2.50
Assuming that Tyro uses a three-way analysis of overhead variances, what is the spending variance? A. P 750 F C. P 950 F B. P 750 U D. P1,500 U

. 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

. 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

Four-way overhead variance
. Safin Corporation’s master budget calls for the production of 5,000 units of product monthly. The annual master budget includes indirect labor of P144,000 annually. Safin considers indirect labor to be a variable cost. During the month of April, 4,500 units of product were produced, and indirect labor costs of P10,100 were incurred. A performance report utilizing flexible budgeting would report a budget variance for indirect labor of: A. P1,900 Unfavorable. C. P1,900 Favorable. B. P 700 Unfavorable. D. P 700 Favorable.

. Wala Company applies overhead on a direct labor hour basis. Each unit of product requires 5 direct labor hours. Overhead is applied on a 30 percent variable and 70 percent fixed basis; the overhead application rate is P16 per hour. Standards are based on a normal monthly capacity of 5,000 direct labor hours.
During September 2006, Wala produced 1,010 units of product and incurred 4,900 direct labor hours. Actual overhead cost for the month was P80,000.
What is total annual budgeted fixed overhead cost? A. P 56,000 C. P672,000 B. P 56,560 D. P678,720

. Budgeted variable overhead for the level of production achieved is 40,000 machine-hours at a budgeted cost of P62,000. Actual variable overhead at the level of production achieved was 38,000 hours at an actual cost of P62,400. What is the total variable overhead variance? A. P400 favorable C. P3,100 unfavorable B. P400 unfavorable D. P3,100 favorable

. The Pinatubo Company makes and sells a single product and uses standard costing. During January, the company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units of product. The standard cost card for one unit of product includes the following:
Variable factory overhead: 3.0 DLHs @ P4.00 per DLH
Fixed factory overhead: 3.0 DLHs @ P3.50 per DLH
For January, the company incurred P22,000 of actual fixed overhead costs and recorded a P875 favorable volume variance.
The budgeted fixed overhead cost for January is: A. P31,500 C. P30,625 B. P32,375 D. P33,250

. The variable-overhead spending variance is P1,080, unfavorable. Variable overhead budgeted at 40,000 machine hours is P50,000. Actual machine hours were 36,000. What was the actual variable-overhead rate per machine hour? A. P1.28 C. P1.39 B. P1.25 D. P1.52

. Calvin Klein Company has a standard fixed cost of P6 per unit. At an actual production of 8,000 units a favorable volume variance of P12,000 resulted. What were total budgeted fixed costs? A. P36,000. C. P48,000. B. P60,000. D. P75,000.

. Puma Company had an 25,000 unfavorable volume variance, a P18,000 unfavorable variable overhead spending variance, and P2,000 total under applied overhead. The fixed overhead budget variance is A. P41,000 favorable C. P45,000 favorable B. P41,000 Unfavorable D. P45,000 Unfavorable

. Arlene had an P18,000 unfavorable volume variance, a P25,000 unfavorable variable overhead spending variance, and P2,000 total under applied overhead. The fixed overhead budget variance is: A. P41,000 favorable C. P45,000 favorable B. P41,000 Unfavorable D. P45,000 Unfavorable

. Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was P12,000 favorable and the fixed overhead spending variance was P16,000 unfavorable, fixed manufacturing overhead applied must be: A. P516,000 C. P512,000 B. P504,000 D. P496,000

. CTV Company has a standard fixed cost of P6 per unit. At an actual production of 8,000 units a favorable volume variance of P12,000 resulted. What were total budgeted fixed costs? A. P36,000 C. P48,000 B. P60,000 D. P75,000

. Richard Company employs a standard absorption system for product costing. The standard cost of its product is as follows: Raw materials P14.50 Direct labor (2 DLH x P8) 16.00 Manufacturing overhead (2 DLH 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 P 3,600,000 Fixed 3,000,000 P 6,600,000
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 P260,000 fixed and P315,000 variable. The total manufacturing overhead applied during November was P572,000.
The fixed manufacturing overhead volume variance for November is: A. P10,000 favorable C. P10,000 unfavorable B. P3,000 unfavorable D. P22,000 favorable

. Using the information for Richard Company in the preceding number, the total variance related to efficiency of the manufacturing operation for November is: A. P 9,000 unfavorable C. P12,000 unfavorable B. P21,000 unfavorable D. P11,000 unfavorable

Question Nos. 65 and 66 are based on the following:
Tiny Bubbles Company had the following activity relating to its fixed and variable overhead for the month of July.
Actual costs Fixed overhead P120,000 Variable overhead 80,000

Flexible budget
(Standard input allowed for actual output achieved x the budgeted rate) Variable overhead P 90,000

Applied
(Standard input allowed for actual output achieved x the budgeted rate) Fixed overhead P125,000 Variable overhead spending variance 1,200 F Production volume variance 5,000 U

. If the budgeted rate for applying variable manufacturing overhead was P20 per direct labor hour, how efficient or inefficient was Tiny Bubbles in terms of using direct labor hours as an activity base? A. 100 direct labor hours inefficient C. 100 direct labor hours efficient B. 440 direct labor hours inefficient D. 440 direct labor hours efficient

. The fixed overhead efficiency variance is: A. P 3,000 favorable C. P 3,000 unfavorable B. P10,000 unfavorable D. Never a meaningful variance

Questions 67 and 68 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

. For March, the unfavorable variable overhead spending variance was: A. P6,000 C. P12,000 B. P10,000 D. P22,000

. For March, the fixed overhead volume variance was: A. P96,000U C. P80,000U B. P96,000F D. P80,000F

. Edney Company employs standard absorption system for product costing. The standard cost of its product is as follows: Raw materials P14.50 Direct labor (2 DLH x P8) 16.00 Manufacturing overhead (2 DLH x P11) 22.00
The manufacturing overhead rate is based upon a normal activity level of 600,000 direct labor hours. Edney 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
During November, Edney produced 26,000 units. Edney used 53,500 direct labor hours in November at a cost of P433,350. Actual manufacturing overhead for the month was P260,000 fixed and P315,000 variable. The total manufacturing overhead applied during November was P572,000.
The variable manufacturing overhead variances for November are: Spending Efficiency A. P9,000 unfavorable P3,000 unfavorable B. P6,000 favorable P9,000 unfavorable C. P4,000 unfavorable P1,000 favorable D. P9,000 favorable P12,000 unfavorable

. The fixed manufacturing overhead variances for November are: Spending Volume A. P10,000 favorable P10,000 favorable B. P10,000 unfavorable P10,000 favorable C. P 6,000 favorable P 3,000 unfavorable D. P 4,000 unfavorable P22,000 favorable

The following information will be used to answer Question Nos. 71 through 74:
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 |
. What is the fixed overhead spending variance? A. P4,000 Favorable C. P8,000 Unfavorable B. P8,000 Favorable D. P4,000 Unfavorable

. What is the volume variance? A. P4,000 Favorable C. P8,000 Favorable B. P4,000 Unfavorable D. P8,000 Unfavorable

. How much was the variable overhead spending variance? A. P 400 Favorable C. P400 Unfavorable B. P1,200 Favorable. D. P1,200 Unfavorable

. 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

Questions 75 through 78 are based on Darf Company, which applies overhead on the basis of direct labor hours. Two direct labor hours are required for each product unit. Planned production for the period was set at 9,000 units. Manufacturing overhead is budgeted at P135,000 for the period, of which 20% of this cost is fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was P108,500 and fixed manufacturing overhead cost was P28,000. Darf Company uses a four variance method for analyzing manufacturing overhead.

. The variable overhead spending variance for the period is A. P5,300 unfavorable C. P6,300 unfavorable B. P1,200 unfavorable D. P6,500 unfavorable

. The variable overhead efficiency variance (quantity) variance for the period is A. P5,300 unfavorable C. P1,200 unfavorable B. P1,500 unfavorable D. P6,500 unfavorable

. The fixed overhead budget (spending) variance for the period is A. P6,300 unfavorable C. P2,500 unfavorable B. P1,500 unfavorable D. P1,000 unfavorable

. The fixed overhead volume (denominator) variance for the period is A. P 750 unfavorable C. P2,500 unfavorable B. P1,500 unfavorable D. P1,000 unfavorable

Comprehensive
. Big Marat, Inc. began operations on January 3. Standard costs were established in early January assuming a normal production volume of 160,000 units. However, Big Marat produced only 140,000 units of product and sold 100,000 units at a selling price of P180 per unit during the year. Variable costs totaled P7,000,000, of which 60% were manufacturing and 40% were selling. Fixed costs totaled P11,200,000, of which 50% were manufacturing and 50% were selling. Big Marat had no raw materials or work-in-process inventories at December 31. Actual input prices and quantities per unit of product were equal to standard.
Using absorption costing, Big Marat’s income statement would show: | A. | B. | C. | D. | Cost of Goods Sold at Standard Cost | P8,200,000 | P7,200,000 | P6,500,000 | P7,000,000 | Overhead Volume Variance | P800,000 U | P800,000 F | P700,000 U | P700,000 F |

Questions No. 80 through 85 are based on the following information:
You have recently graduated from a university and have accepted a position with Villar Company, the manufacturer of a popular consumer product. During your first week on the job, the vice president has been favorably impressed with your work. She has been so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee meeting this morning for the purpose of leading a discussion on the variances reported for last period. Anxious to favorably impress the executive committee, you took the variances and supporting data home last night to study.

On your way to work this morning, the papers were laying on the seat of your new, red convertible. As you were crossing a bridge on the highway, a sudden gust of wind caught the papers and blew them over the edge of the bridge and into the stream below. You managed to retrieve only one page, which contains the following information:

Standard Cost Summary Direct materials, 6 pounds at P3 | P18.00 | Direct labor, 0.8 hours at P5 | 4.00 | Variable overhead, 0.8 hours at P3 | 2.40 | Fixed overhead, 0.8 hours at P7 | 5.60 | | P30.00 |

| Total Standard Cost | V A R I A N C E S R E P O R T E D | | | Price or Rate | Spending or Budget | Quantity or Efficiency | Volume | Direct materials | P405,000 | P6,900 F | | P9,000 U | | Direct labor | 90,000 | 4,850 U | | 7,000 U | | Variable overhead | 54,000 | | P1,300 F | ?@ | | Fixed overhead | 126,000 | | 500 F | | P14,000U |
Applied to Work in process during the period
@ Figure obliterated.

You recall that manufacturing overhead cost is applied to production on the basis of direct labor-hours and that all of the materials purchased during the period were used in production. Since the company uses JIT to control work flows, work in process inventories are insignificant and can be ignored.

It is now 8:30 A.M. The executive committee meeting starts in just one hour; you realize that to avoid looking like a bungling fool you must somehow generate the necessary “backup” data for the variances before the meeting begins. Without backup data it will be impossible to lead the discussion or answer any questions.

. How many pounds of direct materials were purchased and used in the production of 22,500 units? A. 138,000 lbs. C. 135,000 lbs. B. 132,000 lbs. D. 137,300 lbs.

. What was the actual cost per pound of material? A. P3.00 C. P2.95 B. P3.05 D. P3.10

. How many actual direct labor hours were worked during the period? A. 18,000 C. 19,400 B. 16,600 D. 18,970

. How much actual variable manufacturing overhead cost was incurred during the period? A. P55,300 C. P56,900 B. P58,200 D. P59,500

. What is the total fixed manufacturing overhead cost in the company’s flexible budget? A. P112,500 C. P139,500 B. P140,000 D. P125,500

. What were the denominator hours for last period? A. 18,000 hours C. 20,000 hours B. 22,000 hours D. 25,000 hours

Productivity measures
Manufacturing cycle efficiency
. Fireout Company manufactures fire hydrants in Bulacan. The following information pertains to operations during the month of May: Processing hours (average per batch) 8.0 Inspection hours (average per batch) 1.5 Waiting hours (average per batch) 1.5 Move time (average per batch) 1.5 Units per batch 20 units
The manufacturing cycle efficiency (MCE) is: A. 72.7% C. 64.0% B. 36.0% D. 76.0%

Throughput time
. Choco Company manufactures fire hydrants in Bulacan. The following information pertains to operations during the month of May: Processing time (average per batch) 8.0 hours Inspection time (average per batch) 1.5 hours Waiting time (average per batch) 1.5 hours Move time (average per batch) 1.5 hours Units per batch 20 units
The throughput time is: A. 12.5 hours C. 4.5 hours B. 8.0 hours D. 9.5 hours

Delivery cycle time
. Alabang Corporation is a highly automated manufacturing firm. The vice president of finance has decided that traditional standards are inappropriate for performance measures in an automated environment. Labor is insignificant in terms of the total cost of production and tends to be fixed, material quality is considered more important than minimizing material cost, and customer satisfaction is the number one priority. As a result, production and delivery performance measures have been chosen to evaluate performance. The following information is considered typical of the time involved to complete and ship orders.
Waiting Time: From order being placed to start of production 8.0 days From start of production to completion 7.0 days Inspection time 1.5 days Processing time 3.0 days Move time 2.5 days
The Delivery Cycle Time is: A. 22 days C. 14 days B. 11 days D. 7 days

. Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was P12,000 favorable and the fixed overhead spending variance was P16,000 unfavorable, fixed manufacturing overhead applied must be A. P516,000 C. P512,000 B. P488,000 D. P496,000