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MAS 3104 MCQ – Standard Costing and Variance Analysis OCTOBER 2021

1. A company would most likely have a favorable labor rate variance and unfavorable labor efficiency if
a. the mix of workers used in the production process was more experienced than the normal mix
b. the mix of workers used in the production process was less experienced than the normal mix
c. workers from another part of the plant were used due to an extra heavy production schedule
d. the purchasing agent acquired a very high quality of material that resulted in less spoilage

2. In the analysis of standard cost variances, the item which receives the most diverse treatment in accounting is
a. Direct labor cost c. Direct material cost
b. Factory overhead cost d. Variable cost.

3. Which one of the following would not explain an adverse direct labor efficiency variance?
a. Poor scheduling of direct labor hours
b. Setting standard efficiency at a level that is too low
c. Unusually lengthy machine breakdowns
d. A reduction in direct labor training
e. None of the above

4. When expenses estimated for the capacity attained differ from the actual expenses incurred, the resulting balance is
termed the
a. Activity variance. c. Unfavorable variance.
b. Budget variance. d. Volume variance.

5. At the end of a period, a significant material price variance should be

a. closed to Cost of Goods Sold.
b. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods Sold.
c. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.
d. carried forward as a balance sheet account to the next period.

6. The sum of the material price variance (calculated at point of purchase) and material quantity variance equals
a. the total cost variance.
b. the material mix variance.
c. the material yield variance.
d. no meaningful number.

7. A favorable efficiency variance for direct materials might indicate:

a. that lower-quality materials were purchased
b. an overskilled workforce
c. poor design of products or processes
d. a lower-priced supplier was used

8. A favorable price variance for direct manufacturing labor might indicate that:
a. employees were paid more than planned
b. budgeted price standards are too tight
c. underskilled employees are being hired
d. an efficient labor force

9. A purchasing manager’s performance is best evaluated using the:

a. direct materials price variance
b. direct materials flexible-budget variance
c. direct manufacturing labor flexible-budget variance
d. effect the manager’s action has on total costs for the entire company

10. When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable variable
overhead efficiency variance is:
a. excessive machine breakdowns
b. the production scheduler’s impressive scheduling of machines
c. a decline in the cost of energy
d. strengthened demand for the product

11. When machine-hours are used as an overhead cost-allocation base, a rush order resulting in unplanned overtime that
used less-skilled workers on the machines would most likely contribute to reporting a(n):
a. favorable variable overhead spending variance
b. unfavorable variable overhead efficiency variance
c. favorable fixed overhead flexible-budget variance

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b. unfavorable production-volume variance

12. The difference between budgeted fixed manufacturing overhead and the fixed manufacturing overhead allocated to
actual output units achieved is called the fixed overhead:
a. efficiency variance
b. flexible-budget variance
c. combined-variance analysis
d. production-volume variance

13. When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment
unexpectedly increase, the most likely result would be to report a(n):
a. unfavorable variable overhead spending variance
b. favorable variable overhead efficiency variance
c. unfavorable fixed overhead flexible-budget variance
b. favorable production-volume variance

14. The variable overhead flexible-budget variance measures the difference between:
a. actual variable overhead costs and the static budget for variable overhead costs
b. actual variable overhead costs and the flexible budget for variable overhead costs
c. the static budget for variable overhead costs and the flexible budget for variable overhead costs
d. None of these answers is correct.

15. When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable production-
volume variance is:
a. an increase in the selling price of the product
b. the purchase of a new manufacturing machine costing considerably less than expected
c. a decline in the cost of energy
d. strengthened demand for the product

16. The following direct manufacturing labor information pertains to the manufacture of Product B.
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 P500
Workers’ benefits treated as direct manufacturing labor costs 20% of wages
What is the standard direct manufacturing labor cost per unit of Product B?
a. P30 c. P24
b. P15 d. P12

17. Lucky Company sets the following standards for the year.
Direct labor cost [2 DLH @ P4.50] P9.00
Manufacturing overhead [2 DLH @ P7.50] P15.00

Lucky Company plans to produce its only product equally each month. The following is the annual budget for
overhead costs:
Fixed overhead P150,000
Variable overhead 300,000
Normal activity in direct labor hours 60,000

In March, Lucky 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 Lucky Company is

a. P250 U c. P750 U
b. P500 U d. P375 U

18. JKL Co. has total budgeted fixed costs of P75,000. Actual production of 19,500 units resulted in a P3,000 unfavorable
volume variance. What normal capacity was used to determine the fixed overhead rate?
a. 18,750 c. 17,590
b. 20,313 d. 16,500

19. The following information is available from the Tyro Company:

Actual factory O/H P15,000
Fixed O/H expenses, actual P7,200
Fixed O/H expenses, budgeted P7,000
Actual hours 3,500
Standard hours 3,800
Standard variable O/H rate per P2.50
DLH
Assuming that Tyro uses a three-way analysis of O/H variances, what is the spending variance?

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a. P750 F c. P950 F
b. P750 U. d. P200 U

20. At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine-hours. The
performance report for July showed that actual maintenance costs totaled P9,800 and that the associated spending
variance was P200 unfavorable. If 8,000 machine-hours were actually worked during July, the budgeted maintenance
cost per machine-hour was:
a. P1.20. c. P1.275.
b. P1.25. d. P1.225.

21. Daly had a P9,000 favorable volume variance, a P7,500 unfavorable variable overhead spending variance, and
P6,000 total overapplied overhead. The fixed overhead budget variance was
a. P4,500 favorable. c. P4,500 unfavorable.
b. P8,000 favorable. d. P8,000 unfavorable

22. 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 – unfavorable P3,000
Total payroll P126,000
What was Lion’s direct labor efficiency variance?
a. P6,000 F c. P6,300 F
b. P6,150 F d. P6,450 F

23. Air, Inc. uses a standard cost system. Overhead cost information for Product CO for the month of October is as
follows:
Total actual overhead incurred P12,600
Fixed overhead budgeted P3,300
Total standard overhead rate per DLH P4
Variable overhead rate per DLH P3
Standard hours allowed for actual production 3,500
What is the overall or net overhead variance?
a. P1,200 F c. P1,400 F
b. P1,200 U d. P1,400 U

24. Union Company uses a standard cost accounting system. The following overhead costs and production data are
available for August:
Standard fixed overhead rate per DLH P1
Standard variable overhead rate per DLH P4
Budgeted monthly DLH 40,000
Actual DLH worked 39,500
Standard DLH allowed for actual production 39,000
Overall overhead variance – favorable P2,000
The actual factory overhead for August should be
a. P195,000 d. P199,500
b. P197,000 e. P193,000
c. P197,500

25. Given for the variable factory overhead of GHI Products, Inc.: P39,500 actual input at budgeted rate, P41,500
flexible budget based on standard input allowed for actual output, P2,500 favorable flexible budget variance.
Compute the spending variance.
a. P500 unfavorable. c. P500 favorable.
b. P2,000 favorable. d. P2,000 unfavorable

26. The records of Phoenix Corporation revealed the following data for the current year.
Work in Process P 73,150
Finished Goods 115,000
Cost of Goods Sold 133,650
Direct Labor 111,600
Direct Material 84,200
Assume that Phoenix has underapplied overhead of P37,200. What journal entry is needed to close the overhead
account? (Round decimals to nearest whole percent.)
a. Debit Work in Process P8,456; Finished Goods P13,294; Cost of Goods Sold P15,450 and credit Overhead
P37,200
b. Debit Overhead P37,200 and credit Work in Process P8,456; Finished Goods P13,294; Cost of Goods Sold
P15,450
c. Debit Work in Process P37,200 and credit Overhead P37,200
d. Debit Cost of Goods Sold P37,200 and credit Overhead P37,200

27. The following is a standard cost variance analysis report on direct labor cost for a division of a manufacturing
company.

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Job Actual Hours at Actual Hours at Standard Hours at

Actual Wages Standard Wages Standard Wages
213 P3,243 P3,700 P3,100
215 15,345 15,675 15,000
217 6,754 7,000 6,600
219 19,788 18,755 19,250
221 3,370 3,470 2,650
Totals P48,500 P48,600 P46,600
What is the total flexible budget direct labor variance for the division?
A. P1,000 unfavorable. C. P1,900 favorable.
B. P1,900 unfavorable. D. P2,000 unfavorable.

28. The standards for direct labor for a product are 2.5 hours at P8 per hour. Last month, 9,000 units were
produced and the labor efficiency variance was P8,000 U. The actual number of hours worked during the past
period was:
A. 23,500. C. 20,500.
B. 22,500. D. 21,500.

29. Beacon Company manufactures various types of plastic and rubber coated tubing products for v arious
industries. Standard cost accounting system is used. The following are available:
Actual total overhead P 44,000
Budgeted fixed costs P 12,600
Total overhead application rate per standard direct labor hour P 2.50
Actual hours used 16,000
Standard hours allowed 17,000
Normal activity in hours 14,000
The overhead budget variance is
A. P1,500 favorable. C. P4,200 favorable.
B. P1,500 unfavorable. D. P4,200 unfavorable.

30. Derf Company uses a standard cost system in which it applies manufacturing overhead on the basis of direct
labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at
9,000 units. Manufacturing overhead was budgeted at P135,000 for the period; 20 percent of this cost was
fixed. The 17,200 hours worked during the period resulted in prod uction of 8,500 units. Variable manufacturing
overhead cost incurred was P108,500 and fixed manufacturing overhead cost was P28,00 0. The denominator-
level variance for the period was:
A. P5,300 unfavorable. C. P1,500 unfavorable.
B. P1,200 unfavorable. D. P6,500 unfavorable.

31. TYD, Inc. reported the following data for the year:
Actual hours 120,000
Denominator hours 150,000
Standard hours allowed for output 140,000
Fixed predetermined overhead rate P6 per hour
Variable predetermined overhead rate P4 per hour
TYD’s non-controllable variance was
A. P60,000 which is neither favorable nor under-applied.
B. P60,000 favorable.
C. No volume variance.
D. P60,000 under-applied.

32. Setter Corporation’s master budget calls for the monthly production of 5,000 units. The master budget includes an
annual indirect labor cost of P144,000. Setter 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 d. P700 favorable
b. P1,900 favorable e. P700 unfavorable
c. P119,500 favorable

33. Based on the following partial comparative income for the year 2020 and 2019, compute the amount of change in
contribution margin due to a change in variable cost per unit.
2020 2019
Sales P1,397,250 P1,350,000
Variable expense 1,267,875 1,050,000
Contribution margin P129,375 P300,000
Effective January 1, 2020, the selling price per unit was decreased by 10 percent.
a. P60,375 increase c. P72,450 increase
b. P60,375 decrease d. P72,450 decrease

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34. Compute the sales volume variance based on the following data:
Budget Actual
Unit sales 20,000 21,000
Unit sales price P30 P32
Unit variable cost P18 P21
a. P30,000 Favorable
b. P12,000 Favorable
c. P30,000 Unfavorable
d. P12,000 Unfavorable

Use the following information for the next three questions.

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 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 materi al was
P60,000, and there was an unfavorable quantity variance of P2,500.

35. ChemKing's standard price for one unit of material is:

a. P2.00 c. P3.00
b. P2.50 d. P5.00

36. The materials price variance for the units used in November was:
a. P2,500 U c. P12,500 U
b. P11,000 U d. P2,500 F

37. The units of material used to produce November output totaled:

a. 12,000 c. 24,000
b. 12,500 d. 25,000

Use the following information for the next three questions.

The Murray Company makes and sells a single product. The company recorded the following activity and cost data
for May:
Number of units completed 45,000 units
Standard direct labor-hours allowed per unit of product 1.5 DLHS
Budgeted direct labor-hours (denominator activity) 72,000 DLHS
Actual fixed overhead costs incurred P66,000
Volume variance P4,275 U
The fixed portion of the predetermined overhead rate is P0.95 per direct labor -hour.

38. The amount of fixed overhead contained in the company's overhead flexible budget for May was:
a. P64,125. c. P68,400.
b. P67,500. d. P70,275.

39. The amount of fixed manufacturing overhead cost applied to work in process during May was:
a. P61,725. c. P42,750.
b. P62,700. d. P64,125.

40. The fixed overhead budget variance for May was:

a. P2,400 U. c. P6,000 U.
b. P2,400 F. d. P6,000 F.

Use the following information for the next four questions.

The Ibarra Company produces its only product, Kool Mint Candy. The standard overhead cost for one pack of the
product follows:
Fixed OH [1.50 hours at P18] P27
Variable OH [1.50 hours at P 10] 15
Total P42
Ibarra Company uses expected volume of 21,000 units. During the year, Ibarra used 31,050 direct labor hours for
the production of 20,000 units. Actual overhead costs were P545,000 fixed and P3 08,700 variable.

41. The amount of variable overhead spending variance is

a. P 6,300 Favorable c. P1,800 Unfavorable
b. P 8,700 Favorable d. P1,800 Favorable

42. The total overhead controllable variance is

a. P23,800 Favorable c. P23,800 Unfavorable
b. P13,300 Favorable d. P13,300 Unfavorable

43. The overhead efficiency variance is

a. P10,500 Favorable c. P10,500 Unfavorable
b. P15,000 Favorable d. P15,000 Unfavorable

44. The amount of volume variance is

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a. Zero c. P27,000 Unfavorable

b. P27,000 Favorable d. P18,000 Unfavorable

Use the following information for the next six questions.

Ultra-Shine Company manufactures a cleaning solvent. The company employs both skilled and unskilled workers. To
produce one 55-gallon drum of solvent requires Materials A and B as well as skilled labor and unskilled labor. The
standard and actual material and labor information is presented below:
Standard:
Material A: 30.25 gallons @ P1.25 per gallon
Material B: 24.75 gallons @ P2.00 per gallon
Skilled Labor: 4 hours @ P12 per hour
Unskilled Labor: 2 hours @ P 7 per hour

Actual:
Material A: 10,716 gallons purchased and used @ P1.50 per gallon
Material B: 17,484 gallons purchased and used @ P1.90 per gallon
Skilled labor hours: 1,950 @ P11.90 per hour
Unskilled labor hours: 1,300 @ P7.15 per hour
During the current month Ultra-Shine Company manufactured 500 55-gallon drums.
Round all answers to the nearest whole peso.
45. What is the total material price variance?
a. P877 F c. P931 U
b. P877 U d. P931 F

46. What is the total material mix variance?

a. P3,596 F c. P4,864 F
b. P3,596 U d. P4,864 U

47. What is the total material yield variance?

a. P1,111 U c. P2,670 U
b. P1,111 F d. P2,670 F

48. What is the labor rate variance?

a. P0 c. P2,583 U
b. P1,083 U d. P1,083 F

49. What is the labor mix variance?

a. P1,083 U c. P1,083 F
b. P2,588 U d. P2,588 F

50. What is the labor yield variance?

a. P2,583 U c. P1,138 F
b. P2,583 F d. P1,138 U

– end -

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