BALIUAG UNIVERSITY

CPA REVIEW 2014-15

MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________

STANDARD COST AND VARIANCE ANALYSIS

THEORY
1. How is labor rate variance computed?
a. The difference between standard and actual rate multiplied by actual hours
b. The difference between standard and actual rate multiplied by standard hours
c. The difference between standard and actual hours multiplied by actual rate
d. The difference between standard and actual hours multiplied by the difference between standard and actual
rate
2. A company uses a two-way analysis for overhead variances budget (controllable) and volume (capacity). Te volume
variance is based on the
a. Total overhead application rate
b. Volume of total expenses at various activity
c. Variable overhead application rate
d. Fixed overhead application rate
3. Listed below are four names for different of standard associated with a standard cost system. Which of these
describes the labor costs that should be incurred under he forthcoming efficient operating conditions?
a. Ideal
b. Basic
c. Maximum-efficiency
d. Currently attainable
4. A debit balance in the labor efficiency variance indicates that
a. Standard hours exceed actual hours
b. Actual hours exceed standard hours
c. Standard rate and standard hours exceed actual rate and actual hours
d. Actual rate and actual hours exceed standard rate and standard hours
5. When performing input-output variance analysis in standard costing, standard hours allowed is a means of
measuring
a. Standard output at standard hours
b. Actual output at standard hours
c. Standard output at actual hours
d. Actual output at actual hours
6. If the total material variance (actual cost of materials used compared with the standard costs of the standard
amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to
price and usage?
a. There is no need to further evaluate the total materials if it is favorable
b. GAAP require that all variances by analyzed in three stages
c. All variances must appear in the annual report to equity (owners) for proper disclosure
d. To allow management to evaluate the efficiency of the purchasing and production functions
7. When computing variances from standard cost, the difference between actual and standard price multiplied by
actual quantity yields a
a. Combined price quantity variance
b. Price variance
c. Volume variance
d. Mix variance
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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________
8. When using full absorption costing, what cost attendant to an element of production (materials, labor or overhead)
are used in order to compute variances from standard amounts?
a. Total costs
b. Variable
c. Fixed costs
d. Controllable costs
9. Which of the following is the most probable reason a company would experience an unfavorable labor rate variance
and a favorable efficiency variance?
a. The mixed worker assigned to the particular job was heavily weighted towards the use of higher paid
experienced individuals.
b. The mix or workers assigned to be particular job was heavily weighted towards the use of new relatively low
pad unskilled workers
c. Because of the production schedule workers from other production areas were assigned to assist particular
process
d. Defective materials caused more labor to produce a standard unit
10. What type of direct material variances for price and usage will arise if the actual number of pounds of materials used
exceeds standard pound allowed but actual cost was less than standard costs?
Usage
Price
Usage
Price
a. Unfavorable
Favorable
c. Favorable
Unfavorable
b. Favorable
favorable
d. Unfavorable
Unfavorable
11. If a company follows the practice of isolating variances at the earliest point in time, 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
c. When material is used in production
d. When purchase order is originated
12. How should a usage variance that is significant in amount be treated at the end of an accounting period?
a. Reported as a differed charge or credit
b. Allocated among work in process inventory, finished goods inventory and cost of goods sold
c. Charged or credited to a cost of goods manufactured
d. Allocated among cost of goods manufactured, finished goods inventory, and cost of goods sold.
13. What is the normal year-end treatment of immaterial variances recognize in a cost accounting system utilizing
standards
a. Reclassified to differed charges until all related production is sold
b. Allocated among cost of goods manufactured and ending work in process inventory
c. Closed to cost of goods sold in the period in which they arose
d. Capitalized as a cost of ending finished goods inventory
14. Which of the following is true concerning standard cost?
a. Standard cost are estimates of cost attainable only under the most ideal conditions, but rarely practicable
b. Standard cost are difficult to use with a process costing system
c. If properly used, standards can help motivate employees
d. Unfavorable variances, material in amount, should be investigated, but large favorable variances need not
be investigated

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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________
15. What standard cost variance represent the difference between actual factory overhead incurred and budgeted
factory overhead based on actual hours worked
a. Volume
b. Spending variance
c. Efficiency variance
d. Quantity variance
16. What does a credit balance in a direct-labor efficiency variance account indicate?
a. The average wage rate paid to direct labor employees was less than the standard rate
b. The actual hours allowed for the units produced were greater than actual direct labor hours used
c. Actual total direct-labor cost incurred were less than standard direct labor cost allowed for the unit
produced
d. The number of units produced was less than the number of units budgeted for the period
17. Which of the following is one of the purposes of standard cost
a. To simplify costing procedures and expedite cost reports
b. To replace budget and budgeting
c. To use them as a basis for product costing for external-reporting purposes
d. To eliminate having an account for under-applied or over-applied factory overhead at the end of the period
18. Given below are the following notations and their respective meanings
AH Actual Hours
SHA Standard hours allowed for actual production
AR Actual rate
SR Standard rate
Which of the following formula represent the calculation of the labor-efficiency variance?
a. SR (AH-SHA)
b. AR (AH-SHA)
c. AH (AR-SR)
d. SHA (AR-SR)
19. When standard costs are used in a process costing system, how, if at all are equivalent units involved or used in the
cost report at standard?
a. Equivalent unit are not used
b. Equivalent units are computed using a special approach
c. The actual equivalent units are multiplied by the standard cost per unit
d. The standard equivalent units are multiplied by actual cost per unit
20. Excess direct labor wages resulting from overtime premium will be disclosed in which type of variance
a. Yield
b. Quantity
c. Labor efficiency
d. Labor rate
21. Which of the following is a purpose of standard costing?
a. Determine break-even production level
b. Control costs
c. Eliminate the need of subjective decisions by management
d. Allocate costs with more accuracy
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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________
22. In analyzing factory overhead variance, the volume variance is the difference between the
a. Amount shown in the flexible budget and the amount shown in master budget
b. Master budget application rate and the flexible budget application rate multiplied by actual hours worked
c. Budget allowance based on standard hours allowed for actual production for the period and the amount
applied during the period
d. Actual amount spent for overhead items during the period and the amount applied during the period.
23. Which of the following cost allocation methods would be used to determine the lowest price that could be quoted
for a special order that would utilize idle capacity within a production area
a. Job order
b. Process
c. Variable
d. Standard
24. If the actual hours worked exceed the standard hours allowed, what type of variance will occur?
a. Favorable labor usage (efficiency ) variance
b. Favorable labor rate variance
c. Unfavorable labor usage (efficiency variance)
d. Unfavorable labor rate variance
25. An unfavorable price variance occurs because of
a. Price increases on raw materials
b. Price decreases on raw materials
c. Less than anticipated levels of waste in the manufacturing process
d. More than anticipated levels of waste in the manufacturing process

PROBLEMS:
1. A Company wants to establish standard costs for the manufacture of its product called A+ Box with the following
specifications: Height: 5 meters; Width: 5 meters; Length: 5 meters. inch think Hardiflex is needed to build the
box and Boiser Blue Paint for finish painting. Each unit of material costs P50.00 and 10 hours are needed to
complete 1 box. The hourly labor rate is P10.50.
Assume that during the month the company purchased 5,555 units of materials at P50.25 per unit; 1,000 units were
produced using 5,500 units of material. Actual time used in production totaled 7,000 direct labor hours at P10.60.
The actual factory overhead incurred totaled P54,000 in which P39,000 are variable costs and P13,000 are fixed
costs.
Assume further that the company planned to produce 1,000 units of product for the month and budgeted P52,000
for factory overhead costs.
Required:
a. Standard cost of materials per product.
b. Standard labor cost per product.
c. Standard cost of materials (used / purchased) for actual units produced.
d. Standard cost of labor for actual units produced.
e. Materials (usage / purchase) price variance.
f. Materials quantity variance.
g. Direct labor rate variance.
h. Direct labor efficiency variance.
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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________
i. FOH variance with fixed budget.
j. FOH variance with flexible budget:
2- way
3 way
4 - way
2. Angel Company manufactures Tennis balls which they produce with the following standard costs:
Direct materials: 2 units of material at P12.00 per unit.
Direct labor: 16 hours at P6.75 per hour.
Factory overhead:
Fixed: 16 hours at P2.00 per hour
Variable: 16 hours at P3.00 per hour
The companys normal capacity is 500 units per month. Meanwhile, the following actual costs were presented:
Materials purchased: 1,000 units at P11.90 per unit
Materials used: 980 units
Direct labor cost incurred: 7,750 hours
Factory overhead cost: 40,000
Work in process, beginning: 1/3 completed 150 units
Started in process: 410 units
Work in process, end: completed 120 units
Units completed 440
Required:
a. Equivalent units of production (FIFO)
b. Materials variances
c. Labor variances
d. 2 way factory overhead variances
3. Beauty Company manufactures hair care products in batches with a standard output of 100 kgs.
Materials
M
A
E

Std. Input (Kg.)

55
33
22
110

Std. Proportion (%)

50
30
20
100

Std. Prices (P/Kg.)

P15.00
P20.00
P10.00

Standard Cost
P825.00
660.00
220.00
P1,705.00

At the end of the month, a batch was completed yielding 105 kgs. of the product using the following mix of
materials:
Materials
M
A
E

Actual Input (Kg.)

60
30
30
120

Actual Prices (P/Kg.)

P14.50
P22.00
P11.50

Standard Cost
P870.00
660.00
345.00
P1,875.00

Required:
a. Total variance
b. Price variance
c. Mix variance
d. Yield Variance
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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________
4. Information on Rex Cos direct material cost 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, what was Rexs direct materials price variance?
a. P2,800 favorable
b. P2,800 unfavorable
c. P6,000 unfavorable
d. P6,000 favorable
5. Perkins Company, which has a standard cost system, had 500 units of raw materials X in its inventory, at June 1,
purchased in May P1.20 per unit and carried at a standard cost ofP1.00. the following information pertains to raw
material X for the month of June
Actual number of units purchased
Actual number of units used
Standard number of units allowed for actual production
Standard cost per unit
Actual cost per unit

1,400
1,500
1,300
P1.00
P1.10

6. During March, Younger companys direct material cost 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
Younger materials usage variance for March
a. P1,250 unfavorable
b. P1,250 favorable
c. P1,300 unfavorable
d. P1,300 favorable
7. Information of Material Companys direct material cost is as follows:
Actual units of direct materials used
20,000
Actual direct material costs
P40,000
Standard price per unit of direct materials
P2.10
Direct materials efficiency variance-favorable
P3,000
What was Materials direct material price variance?
a. P1,000 favorable
b. P1,000 unfavorable
c. P2,000 favorable
d. P2,000 unfavorable
8. A company uses a standard cost system to account for its only product. The materials standard per unit was 4 lbs. at
P5.10 Operating data for April were as follows
Material used
Cost of materials used
Number of finished unit produced

7,800 lbs
P40,950
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
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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________
9. Each finished unit of Product DX-25 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 term2/10, n/30. The
company takes all cash discounts. The standard direct material cost for each unit of DX-25 is
a. P180.00
b. 187.50
c. 183.75
d. 176.40
e. None of these
10. Durable 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 P1.25 each. During April, Durable installed roofs on 20 type R houses, using 22,000 units f
material at a cost of P1.20 per unit, and a total cost P 26,400. Durables material price variance for April is
a. 1,000 favorable
b. 1,100 favorable
c. 1,400 unfavorable
d. 2,500 unfavorable
11. Information on Kennedy Companys direct material cost is as follows:
Standard unit price
P3.60
Actual quantity purchased
1,600
Standard quantity allowed for actual production
1,450
Materials purchased price variance-favorable
P240
What was the actual purchase price per unit rounded to the nearest centavo?
a. P3.06
b. P3.11
c. P3.45
d. 3.75
12. Buckler Company manufactures desks with vinyl tops. The standard material cost for the vinyl used per Model S desk
is P27.00 based on 12 square feet of vinyl at a cost of P2.5 per square foot. A production run of 1,000 desk in march
resulted in usage of 12,600 square feet of vinyl at a cost of P2.00 per square foot. A total cost of P25,200. The usage
variance resulting from the above production run was
a. P1,200 unfavorable
b. P1,350 unfavorable
c. P1,800 favorable
d. P3,150 favorable
13. Throop Company had budgeted 50,000 units of output using 50,000 units raw materials at a total material cost of
100,000. Actual output was 50,000 units of product, requiring 45,000 units of raw materials at a cost P2.10 per unit.
The direct material price variance ad usage variance were
Price
Usage
a. P4,500 unfavorable
P10,000 favorable
b. P5,000 favorable
P10,500 unfavorable
c. P5,000 unfavorable
P10,500 favorable
d. P10,000 favorable
P4,500 unfavorable
Items 14 through 23 are based on the following information
Energy Modification Company produces a gasoline additive, gas Gain. This product increases engine efficiency and
improves gasoline mileage by creating a more complete burn in the combustion process. Careful controls are required
during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is
controlled. Loss of output and efficiency may result of Gas Gain is P135. The standard materials mix and related standard
cost of each chemical used in a 500 liter batch are presented below

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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________

Chemical
Echol
Protex
Benz
CT-40

Standard Input
Quantity in Liters
200
100
250
50
600

Standard Cost
per Liter
P.200
.425
.150
.300

Total cost
P 40.00
42.50
37.50
15.00
P135.00

The quantities of chemicals purchased and used during the current production period are shown in the schedule
below. A total of 140 batches of Gas Gain were manufactured usage variation at the end of each production
period.
Chemical
Echol
Protex
Benz
CT-40

Quantity Purchased
Liters
25,000
13,000
40,000
7,500
85,500

Total Purchase
Price
P5,365
6,240
5,840
2,220
P19,665

Quantity Used
Liters
26,600
12,880
13,800
7,140
84,420

14. What is the purchase price variance for Echol?

a. P365 unfavorable
b. P715 unfavorable
c. P160 favorable
d. P30 favorable
15. What is the purchase price variance of Protex?
a. P365 unfavorable
b. P715 unfavorable
c. P160 favorable
d. P30 favorable
16. What is the purchase price variance for Benz?
a. P365 unfavorable
b. P715 unfavorable
c. P160 favorable
d. P30 favorable
17. What is the purchase price of variance for CT-40
a. P365 unfavorable
b. P715 unfavorable
c. P160 favorable
d. P30 favorable
18. What is the material usage variance for Echol?
a. P420 unfavorable
b. P476 unfavorable
c. P280 favorable
d. P42 favorable
19. What is the materials usage variance for Protex?
a. P42 unfavorable
b. P280 unfavorable
c. P420 favorable
d. P42 favorable

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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________
20. What is the material usage variance for Benz?
a. P280 unfavorable
b. P476 unfavorable
c. P420 favorable
d. P42 favorable
21. What is he material usage variance for CT-40?
a. P280 unfavorable
b. P476 unfavorable
c. P420 favorable
d. P42 favorable
22. What is the materials mix variance for this operation?
a. P294.50 unfavorable
b. P388.50 unfavorable
c. P94.50 favorable
d. P890 favorable
23. What is the materials yield variance for this operation?
a. P294.50 unfavorable
b. P388.50 unfavorable
c. P94.50 favorable
d. P890 favorable
24. Information n Barber companys direct labor cost 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 Barbers direct labor rate variance?
a. P17,250 unfavorable
b. P20,700 unfavorable
c. P21,000 unfavorable
d. P21,000 favorable
25. Information oh Hanleys direct labor cost for the month of January is as follows
Actual direct labor rate
P7.50
Standard direct labor ours allowed
11,000
Actual direct labor hours
10,000
Direct labor rate variance-favorable
P5,500
The standard direct labor rate on January was
a. P6.95
b. P7.00
c. P8.00
d. P8.05
26. Throps Co.s records for April disclosed the following data relating to direct labor rate per hours is April was
a. P5.50
b. P5.00
c. P4.75
d. P4.50

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Intelligence without ambition is a bird without wings. Salvador Dali

BALIUAG UNIVERSITY
CPA REVIEW 2014-15
MANAGEMENT ADVISORY SERVICES

JACF
__________________________________________________________________________________________________
27. Lion Companys 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 Lions direct labor efficiency variance?
a. P6,000 favorable
b. P6,150 favorable
c. P6,300 favorable
d. P6,450 favorable
28. 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 P2,000 direct labor hours.
The direct labor efficiency variance was
a. P1,000 favorable
b. P1,000 unfavorable
c. P2,000 favorable
d. 2,000 unfavorable

END

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Intelligence without ambition is a bird without wings.

Salvador Dali