Variance Analysis and Standard Costing PDF

Preview

Summary

This material covers the topic regarding variance analysis and standard costing, specifically a practice material that encompasses the topic through theories and in problem solving....

Description

MULTIPLE CHOICE: 1. Which of the following statements concerning standard costs is false? a. If properly used, standards can help motivate employees. b. All variances, whether favorable or unfavorable, should be investigated. c. Standard costs should be attainable under conditions of efficient operation. d. A standard cost system may be used with a process costing system or a job order costing system. 2. Standard costing is used to isolate the variances between standards costs and actual costs. It allows management to measure performance and correct inefficiencies, thereby helping to a. Allocate costs accurately. b. Determine the break-even point. c. Control costs. d. Eliminate management’s need for subjective decisions. 3. Both standard costs and budgeted costs are used for controlling costs. However, the two terms are not the same. Standard costs differ from budgeted costs in the standard costs a. Are based on the engineering studies while budgeted costs are historical costs. b. Costs that were incurred for actual production, while budgeted costs are costs that should have been incurred for such production. c. Are costs that should have been incurred for actual production, while budgeted costs are costs that should be incurred for budgeted or planned production. d. Are always expressed in total amounts, while budgeted costs are always expressed in per-unit amounts. 4. The difference between actual costs and standard cost is called a. Favorable variance b. Unfavorable variance

c. variance d. variable

5. Which of the following statements is correct? a. A standard costs system can never be used in both the job order and process costing systems. b. Standard costing can be used in job order costing, but not in process costing system. c. Standard costing can be used in either the job order costing system or process costing system. d. A standard cost system can be used in process costing system, but not in job order costing system.

6. In a process costing system, equivalent units of production are computed to determine the number of complete units that could have been produced, given no beginning and ending work-in-process inventories. If a company uses standard costing in its process costing system, the equivalent units of production a. Are multiplied by the standard cost per unit to compute the total standard cost of units produced. b. Are never used. c. Are converted to standard equivalent unites and then multiplied by the actual cost per unit. d. Are assumed to be zero. 7. A variance shows a deviation of actual results from standard or budgeted results. In deciding whether to investigate a variance or not, management may consider the following factors, except a. The amount of the variance and the cost of investigation. b. Whether the variance is favorable or unfavorable. c. The possibility that investigation will eliminate future occurrences of the variance. d. The trend of the variances over time. 8. The following describe ideal standards, except a. Currently attainable standards. b. Theoretical or maximum efficiency standards. c. Make no allowances for waste, machine downtime, and spoilage. d. Perfection standards. 9. Which of the following does not describe practical standards? a. Currently attainable standards. b. Can be used for product costing and cash budgeting. c. Performance that is reasonably expected to be achieved with an allowance for normal spoilage, waste, and downtime. d. Negate the need to adjust standards if working conditions change 10. A standard cost is an estimate of what a cost should be under normal operation conditions. In establishing standard costs, the following organizational personnel may be involved, except a. Top management c. quality control personnel b. Budgetary accountants d. industrial engineers. 11. Because of the impact of fixed costs in most businesses, standard costing system is usually not effective unless the company also has a flexible budgeting system. In flexible budgeting, a. Standard costs are used to prepare budgets for multiple activity levels. b. Standard costs are never used.

c. Variable costs and fixed costs show the same behavior as budgets for different activity levels are prepared. d. A budget for the expected activity level is prepare showing variable and fixed costs separately. 12. In a standard costing system, actual costs are compared with standard costs. The difference or variance is determined, and responsibility for such variance is assigned or identified to a particular person or department, in order to a. Determine who is at fault and render the appropriate punishment. b. Be able to set the correct selling price of the product. c. Use the knowledge about the variances to promote learning and continuous improvement in the manufacturing operations. d. Trace the variances to the proper inventory accounts so that they may be valued at actual costs. 13. This management practice involves giving significant attention only to those areas in which material variances from expectations occur, that is, giving less attention on areas operation as expected. c. management by exception a. Responsibility Accounting b. Management by objectives d. materials control 14. The materials efficiency variance is the difference between actual and standard quantities used in production, multiplied by the standard price. This variance may be the responsibility of a. Purchasing department c. production department b. Sales department d. personnel department 15. An unfavorable materials spending variance coupled with a favorable materials efficiency variance would most likely result from a. The purchase and use of lower than standard quality materials b. The purchase and use of higher than standard quality materials c. Problems involving machine efficiency d. Changes in product mix 16. For a recent month, the accountant’s standard cost variance analysis report showed a significant amount of unfavorable materials efficiency (quantity or usage) variance that warrants and investigation. The investigation of this variance should begin with the a. Personnel manager b. Purchasing manager only c. Production manager only. d. Production manager or purchasing manager 17. In two-way variance analysis, materials, labor, and variable overhead variances may be broken down into a. Price variance and spending variance b. Quantity or time variance and efficiency variance c. Spending variance and efficiency variance d. Spending variance and volume or capacity variance

18. The difference between the actual time used and the amount of time that should have been used for actual production, multiplied by the standard labor rate per time is called a. Efficiency variance b. Price variance c. Spending variance d. Rate variance 19. The difference between the actual price or rate paid and the standard price or rate that should have been paid, multiplied by the actual quantity or actual time is called a. Efficiency variance b. Quantity variance c. Time variance d. Spending variance ITEMS 20 TO 25 ARE BASED ON THE FOLLOWING INFORMATION: A company produces a product with the following standard costs: Materials, 2 pieces @ P5 per piece Labor 4 hours @ P8 per hour Variable Overhead 4 hours @ P6 per hour Fixed overhead* 4 hours @ P4 per hour Total Standard manufacturing cost per unit

P10 32 24 16 P82

*based on capacity level of 5,000 units 20. If a flexible budget for 4,500 units, 5,000 units, and 5,500 units is prepared for a certain month, the budgeted costs are 4,500units

5,000units

5,500units

a. 369,000 410,000 451,000 b. 297,000 330,000 363,000 410,000 443,000 c. 377,000 d. 0 410,000 0 21. Assume that X is the number of units to be produced and TBC is the total budgeted cost, the flexible budget formula that the company may use to compute total budgeted cost for any value of X within the relevant range is a. TBC = 82x b. TBC = 66x c. TBC = 80,000 d. TBC = 66x + 80,000

22. Assume that during the month, the company actually produced 4,800 units and incurred actual total manufacturing costs of P400,000, how much is the flexible budget for the actual production? a. P400,000 b. 396,800 c. 393,600 d. 316,800 23. How much is the flexible budget variance for the month? a. 3,200 unfavorable b. 6,400 unfavorable c. 10,000 favorable d. 83,200 unfavorable 24. How much is the total standard cost that should have been incurred for the actual production of 4,800 units? a. 396,800 b. 400,000 c. 393,600 d. 316,800 25. How much is the total standard cost variance? a. 3,200 unfavorable b. 6,400 unfavorable c. 10,000 favorable d. 83,200 unfavorable

ITEMS 26 TO 28 ARE BASED ON THE FOLLWING INFORMATION: During July, a company’s direct materials costs for the production of Product X were as follows: Standard unit price Standard quantity allowed for actual production Actual unit purchase price Quantity purchased and used for actual production 26. The total materials cost variance is a. P89,700 unfavorable b. P78,750 favorable c. P10,950 favorable d. P10,950 unfavorable 27. The materials efficiency or usage variance is a. P10,950 unfavorable b. P7,500 unfavorable c. P3,450 unfavorable d. P7,500 favorable

P12.50 6,300 units P13 6,900 units

28. The materials spending variance or price variance is a. P3,450 unfavorable b. P 3,450 favorable c. P7,500 unfavorable d. 10,950 unfavorable ITEMS 29 AND 30 ARE BASED ON THE FOLLOWING INFORMATION E. Bernardo Corporation produces a product called “Earnest”. It uses a standard costing system and values its stock at standard cost. The standard cost of raw materials in product Earnest is: 4 kilos of material Y at P10 per kilo =P40 per unit of Earnest During May, the company purchased 14,200 kilos of Y at a cost of P170,200 or P12 per kilo. It produced 3,000 units of M using 12,600 kilos of Y. 29. What was the raw materials price variance for Material Y? a. P25,200 unfavorable b. P28,400 unfavorable c. P6,000 unfavorable d. P7,200 unfavorable 30. Which of the following is not correct? a. The total materials cost variance is P31,200 unfavorable b. The standard materials cost of the units produced is P120,000 c. The actual cost of materials used in production is P170,400 d. The materials efficiency is P6,000 adverse. 31. The materials mix variance for a product is P450 unfavorable and the materials yield variance is P150 unfavorable. This means that a. The materials price variance is P600 unfavorable b. The materials quantity variance is P600 unfavorable c. The total materials cost variance is definitely P600 unfavorable d. The materials price variance is also unfavorable, but the amount cannot be determined from the given information 32. Information on Chiong Companys materials cost for October 200A is as follows Actual Cost of direct materials Actual quantity of direct materials purchased and used Standard quantity of direct materials allowed for October production Direct materials efficiency variance

P126,000 45,000 pieces 43,500 pieces P4,500 unfavorable

For the month of October, what was Chiong’s direct materials spending variance? a. P4,200 unfavorable b. P4,200 favorable c. P9,000 favorable

d. P9,000 unfavorable ITEMS 33 AND 34 ARE BASED ON THE FOLLOWING INFORMATION Maninang Company installs pre-fabricated stairs on residential houses. The standard materials cost for a low-cost house is P15,000 based on 2 units at a cost of P7,500 each. During May, Maninang Company installed stairs on 30 low-cost housing using 62 units at a cost of P7,450 or P461,900. 33. Maninang Company’s materials price variance is a. P3,100 unfavorable b. P3,100 favorable c. P15,000 unfavorable d. P15,000 favorable 34. Maninang Company’s materials usage variance is a. 3,100 unfavorable b. 3,000 favorable c. 15,000 favorable d. 15,000 unfavorable 35. Delilah Company produces “one-sizes-fits-all” rubber gloves and uses standard costing to account for its costs. Each unit ( a pair ) of finished product contains 0.50 meters of direct materials. However, a 20% direct material spoilage calculated on input quantities occurs during the production process. The cost of direct materials is P10 per meter. How much is the standard direct materials cost per unit of the finished product? a. 6.25 b. 4.00 c. 16 d. 5 ITEMS 36 TO 38 ARE BASED ON THE FOLLOWING INFORMATION: Samson Company uses a standard costing system in the production of its only product. The 84,000 units of raw materials inventory were purchased for P126,000 and 4 units of raw materials are required to produce one unit of final product. In October, the company produced 14,400 units of product. The standard cost allowed for materials was P72,000, and there was an unfavorable usage variance of P3,000. 36. Samson Company’s standard price for one unit of materials is a. 1.25 b. 1.50 c. 2.50 d. 3.00 37. The units of materials used to produce the October output totaled a. 57,600

b. 18,000 c. 60,000 d. 55,200 38. The materials price variance for the units used in October was a. 15,000 unfavorable b. 15,000 favorable c. 3,000 unfavorable d. 3,000 favorable ITEMS 39 TO 41 ARE BASED ON THE FOLLOWING INFORMATION: A manufacturer of portable DVD players buys components from subcontractors for assembly into complete DVD players. Each player requires 6 units of Part A, which has a standard cost of P100 per unit. During May, the company’s records showed the following with respect to Part A: Purchases Purchase Price Units of players produced Units of Part A used in production

15,000 units P110 per unit 2,000 12,400

39. For the month of May, the company’s materials purchase price variance is a. 40,000 unfavorable b. 40,000 favorable c. 150,000 unfavorable d. 150,000 favorable 40. During May, the company incurred materials usage variance of a. 40,000 unfavorable b. 40,000 favorable c. 150,000 unfavorable d. 150,000 favorable

41. The amount that will be shown on a flexible budget for Part A usage during the month of May is a. 1,200,000 unfavorable b. 1,200,000 c. 1,320,000 d. 200,000 ITEMS 42 TO 47 ARE BASED ON THE FOLLOWING INFORMATION: Calzada Company produces Four-Season Drinks by mixing juices of four fruits in season. The standard costs and input for a 50-liter batch of the juice are as follows: Fruits Santol Mango Pineapple Tamarine Total

Standard Input Quantity in Liters 20 10 25 5 60

Standard Cost Per Liter P10.00 21.25 7.50 15.00

Total Standard Cost P200.00 212.50 187.50 75.00 P675.00

The quantities purchased and used during the current month are shown below. A total 14 batches were produced during the month. Fruits Santol Mango Pineapple Tamarind Total

Quantity Purchased (Liters) 300 150 350 80 1,450

Purchase Price P9.50 22.00 7.20 15.40

42. How much is the total materials cost variance? a. 452 unfavorable b. 160 favorable c. 1,415 unfavorable d. 2,027 unfavorable 43. The materials purchase price variance is a. 110.50 favorable b. 122.50 favorable c. 160.00 unfavorable d. 2,027 unfavorable

Quantity Used (Liters) 290 130 350 75 775

44. The materials usage price variance is a. 110.50 favorable b. 122.50 favorable c. 93.75 favorable d. 56.25 unfavorable 45. The market mix variance is a. 160.00 favorable b. 122.50 favorable c. 56.25 unfavorable d. 93.75 favorable 46. The materials yield variance is a. 160.00 favorable b. 122.50 favorable c. 93.75 favorable d. 56.25 unfavorable 47. The materials quantity variance is equal to a. The yield variance b. The total of materials mix and yield variances c. The total of the price, mix, and yield variances d. The mix variance ITEMS 48 AND 49 ARE BASED ON THE FOLLOWING INFORMATION: Aristeo Company produced 3,200 units of product. Each unit requires 2 standard hours. The standard labor rate is P15 per hour. Actual direct labor for the period was P79,200 (6,600 hours x P12)/ 48. What is the direct labor time variance? a. 19,800 favorable b. 16,800favorable c. 6,400 unfavorable d. 3,000 unfavorable 49. What is the direct labor rate variance? a. 19,800 favorable b. 16,800 favorable c. 6,400 unfavorable d. 3,000 unfavorable

ITEMS 50 AND 51 ARE BASED ON THE FOLLOWING INFORMATION:

Dagalangit Company uses a standard cost system. The following information pertains to direct labor for Product A for the month of March: Standard rate per hour Standard hours allowed for actual production Actual rate per hour Labor efficiency variance – unfavorable

P12.00 3,000 hours P12.60 P2,400

50. What were the actual hours worked? a. 3,200 b. 2,800 c. 3,000 d. 3,190 51. What is the standard time required for each unit of product? a. 3,000 b. 3,200 c. 200 d. Cannot be determined from the given information ITEMS 52 AND 53 ARE BASED ON THE FOLLOWING INFORMATION: Information on Zamora Company’s direct labor costs for the month of February is as follows: Total direct labor payroll Favorable direct labor efficiency variance Actual direct labor hours Difference between actual time and standard time

P193,200 2,560 27,600 400 hours

52. what is the company’s direct labor rate variance? a. 16,800 unfavorable b. 16,800 favorable c. 16,560 unfavorable d. 13,800 favorable 53. What is the company’s total direct labor cost variance? a. P14,000 unfavorable b. 2,560 favorable c. 16,560 unfavorable d. 400 favorable

54. For the month of June, M. Garcia Company’s records disclosed the following data relating to direct labor: Actual Cost P25,000 Spending variance 2,500 favorable

Efficiency variance Standard cost

3,750 unfavorable P23,750

The actual direct labor hours used during June was 5,000 hours. How much was the company’s standard direct labor rate per hour? a. P5.00 b. P4.50 c. P5.50 d. P4.75 55. J. Valencia Company’s direct labor costs for the month of October were as follows: Standard rate per hour P25.20 Standard direct labor hours 84,000 hours Actual direct labor hours 80,000 hours Direct labor rate variance P67,200 favorable What was J. Valencia Company’s total direct labor payroll for the month of October? a. P1,952,000 b. P2,080,000 c. P1,948,800 d. P2,083,200 ITEMS 56 AND 57 ARE BASED ON THE FOLLOWING INFORMATION: Charis Corporation produces a single product with a standard direct labor cost of 4 hours @ P12 per hour. During May, 1,000 units were produced using 4,100 hours @ P12.20 per hour. 56. The direct labor efficiency variance is a. P1,200 unfavorable b. P400 unfavorable c. P420 unfavorable d. P1,220 unfavorable 57. The total labor cost variance is a. P1,200 unfavorable b. P820 unfavorable c. P2,020 favorable d. P20,020 unfavorable

ITEM 58 TO 60 ARE BASED ON THE FOLLOWING INFORMATION: A major activity at the Professional Regulation Commission is the processing of application forms for the Board Examinations of the various professions under its

control. To analyze and control the costs incurred in the Applications Department, the PRC’s accountant previously prepared the following budgeted data for the year 200A: Normal number of applications processed per year Budgeted variable costs of processing the 150,000 applications Fixed cost per year Number of hours per 100 applications processed Wage rate per 100 applications

150,000 P10,500,000 2,500,000 200 hours P6,000

During the year 200A, the department processed a total of 120,000 applications using 250,000 hours. The cost incurred were: Total costs P11,140,000 Labor costs 7,500,000 58. For 200A, the application Department’s total cost to process the 120,000 applications assuming standard performance should be a. P13,000,000 b. P10,900,000 c. P10,500,000 d. P8,400,000 59. The total labor cost variance for 200A is a. 300,000 unfavorable b. 300,000 favorable c. 1,200,000 unfavorable d. 1,860,000 favorable 60. The total direct labor cost variance may be broken down into: Spending Variance Efficiency Variance a. 1,200,000 unfavorable 10,000 unfavorable b. 1,860,000 unfavorable 300,000 unfavorable c. 300,000 unfavorable P0 d. P0 300,000 unfavorable

ITEMS 61 TO 63 ARE BASED ON THE FOLLOWING INFORMATION: The accountant of Tri...