Download Standard Costs and Variance Analysis PDF

TitleStandard Costs and Variance Analysis
TagsBudget Inventory Production And Manufacturing Variance Labour Economics
File Size124.2 KB
Total Pages14
Document Text Contents
Page 7

PROBLEMS
1. KNOTTY, Inc. estimated the cost of a project it started in October 19x4 as follows: Direct

materials, P495,000; direct labor, 6,000 hours at P30 per hour; variable overhead, P24 per
direct labor hour. By the end of the month, all the required materials have been used at
P491,900; labor was 80% complete at 4,650 hours at P30 per hour; and, the variable
overhead amounted to P113,700. The total variance for the project as at the end of the month
was
A. P7,500 U B. P8,400 U C. P9,000 F D. P9,00 F

2. SUPER Co. at normal capacity, operates at 600,000 labor hours with standard labor rate of
P20 per hour. Variable factory overhead is applied at the rate of P12 per labor hour. Four
units should be completed in an hour.
Last year, 1,350,000 units were produced using 300,000 labor hours. All labor hours were
paid at the standard rate, and actual overhead cost consisted of P3,738,000 for variable items
and P3,000,000 fixed items.
The total labor and overhead costs saved, by producing at more than standard, amounted to
A. P450,000 B. P500,000 C. P750,000 D. P1,200,000

3. A defense contractor for a government space project has incurred $2,500,000 in actual design
costs to date for a guidance system whose total budgeted design cost is $3,000,000. If the
design phase of the project is 60% complete, what is the amount of the contractor's current
overrun or savings on this design work?
A. $300,000 savings. C. $500,000 savings.
B. $500,000 overrun. D. $700,000 overrun.

4. Hankies Unlimited has a signature scarf for ladies that is very popular. Certain production
and marketing data are indicated below:

Cost per yard of cloth P36.00
Allowance for rejected scarf 5% of production
Yards of cloth needed per scarf 0.475 yard
Airfreight from supplier P0.60/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 Hankies Unlimited should use in its cost
sheets.
A. P16.87 B. P17.76 C. P18.21 D. P17.30

5. ALPHA Co. uses a standard cost system. Direct materials statistics for the month of May,
19x7 are summarize below:

Standard unit price P90.00
Actual units purchased 40,000
Standard units allowed for actual production 36,250
Materials price variance- favorable P6,000

What was the actual purchase price per unit?
A. P75.00 B. P85.89 C. P88.50 D. P89.85

6. ChemKing uses a standard costing system in the manufacture of its single product. The
35,000 units of raw material in inventory were purchased for $105,000, 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 $60,000, and there
was an unfavorable quantity variance of $2,500. The materials price variance for the units
used in November was
A. $2,500 U B. $11,000 U C. $12,500 U D. $3,500 F

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7. The Porter Company has a standard cost system. In July the company purchased and used
22,500 pounds of direct material at an actual cost of $53,000; the materials quantity variance
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:
A. $2,725 F. B. $2,725 U. C. $3,250 F. D. $3,250 U.

8. Cox Company's direct material costs for the month of January were as follows:
Actual quantity purchased 18,000 kilograms
Actual unit purchase price $ 3.60 per kilogram
Materials price variance – unfavorable (based on purchases) $ 3,600
Standard quantity allowed for actual production 16,000 kilograms
Actual quantity used 15,000 kilograms

For January there was a favorable direct material quantity variance of
A. $3,360. B. $3,375. C. $3,400. D. $3,800.

9. JKL Company has a standard of 15 parts of component X costing P1.50 each. JKL
purchased 14,910 units of component X for P22,145. JKL 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. B. 1,090 units. C. 1,000 units D. 1,160 units

10. The following direct labor information pertains to the manufacture of product Glu:
Time required to make one unit 2 direct labor hours
Number of direct workers 50
Number of productive hours per week, per worker 40
Weekly wages per worker $500
Workers’ benefits treated as direct labor costs 20% of wages

What is the standard direct labor cost per unit of product Glu?
A. $30. B. $24. C. $15. D. $12.

11. ACE 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 B. P60,000 C. P62,500 D. P70,000

12. Pane Company's direct labor costs for April are as follows:
Standard direct labor hours 42,000
Actual direct labor hours 41,200
Total direct labor payroll $247,200
Direct labor efficiency variance – favorable $3,840

What is Pane's direct labor rate variance?
A. $44,496 U B. $49,440 U C. $49,440 F D. $50,400 F

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 1,000, and the resulting direct labor budget variance was a favorable P3,400. The
standard direct labor rate was P28.00 per hour, but an unexpected labor shortage necessitated
the hiring of higher-paid workers for some jobs and had resulted in a rate variance of P800.
The actual direct labor rate was
A. P27.20 per hour B. P28.80 per hour C. P30.25 per hour D. P31.40 per hour

14. To improve productivity, ST. MICHAEL Corp. instituted a bonus plan where employees are
paid 75% of the time saved when production performance exceeds the standard level of

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