SPECIAL SESSION - USPF Rey D.

Amaya,CPA, MAIA
Standard Costing and Variance Analysis November 30, 2016
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ACTUAL COST - historical costs, which have been incurred in a past period.

ESTIMATED COST – Predetermined costs based on information available before actual production or
purchase. Estimated costs usually are compiled by methods, which are not as scientific as those used
in standard costs. These are costs that are expected or anticipated to be.

STANDARD- A measure of acceptable performance established by management as a guide in making

economic decisions..

STANDARD COST - These are predetermined estimates of what costs ought to be

a. The amount and cost of
a. Direct material
b. Direct labor
c. Factory overhead required producing one unit of finished product.
b. Pre-determined, budgeted unit costs established to motivate operational productivity and
efficiency.
c. A monetary measure to which actual costs is compared resulting to variance computation.
d. It can be applied both for job order and process costing systems.

STANDARD COST SYSTEM

An accounting system that uses standard costs rather than actual costs to account for units as they
flow through the manufacturing process.

OBJECTIVE OF THE STANDARD COST SYSTEM

To help a business operate more effectively and more efficiently by obtaining the optimum
output from the inputs availabl

USES OF STANDARD COST

Standard costs may be used for…
1. Cost control and reduction
2. Efficiency Measurement
3. Efficient Costing applications
4. Budget preparation
5. Inventory valuation
6. Selling prices determination

APPROACH IN DEVELOPING STANDARD COST

1. Estimate the amount and cost of material, labor, and overhead required to efficiently produce
one unit of product in the current period.
a. Standard Cost for Materials – should reflect the final, delivered cost of the materials,net of
any discounts taken. It includes the amount of material required for each unit of finished
product, as well as the allowance for unavoidable waste, spoilage and other normal
inefficiencies.
b. Standard Cost for Labor – Standard rate per hour should include not only wages earned
but also fringe benefits and other labor costs. Standard hours per unit reflects the labor
hours required to complete one unit of product.
c. Standard Cost for Overhead

1
 i. Variable Overhead – Price standard is the variable portion of the predetermined
factory overhead rate multiplied by the driver or the allocation based use by the
company (DLH, MH or other cost drivers)
ii. Fixed Overhead – the amount of fixed overhead that will be incurred in each
production department including service department cost.

2. The standard units costs are used by accountants to value:

a. Inventories of raw materials, work in process, and finished goods and
b. The cost of goods sold.

2
VARIANCES ANALYSIS – DIFFERENCE BETWEEN ACTUAL AND STANDARD

1. The difference between actually incurred costs and the “should be” incurred costs.
2. It can be either favorable or unfavorable.
3. It should be assigned to the department or division that has the ability to control the activity that causes
the variance.
4. As a general rule, all variances should be recorded as soon as possible so that corrective action may be
taken. By doing so, variance analysis is useful to management because it points to the areas of operations
most in need of management's attention.
5. Adhering to the concept of Management by Exception, material variances, whether favorable or not are
necessary to be investigated upon or inquired about.

COST VARIANCES
A. MATERIAL VARIANCES (MATERIAL PRICE AND QUANTITY VARIANCE)

AP × AQ SP × AQ SP × SQ

Material Price Variance Material Quantity Variance

Total Material Variance

POINT OF PURCHASE MODEL

AP × AQu SP × AQu SP × SQ

Material Price Usage Material Quantity

Total Material Variance

AP × AQp SP × AQp SP × AQu

Material Purchase Material Inventory

Price Variance Variance

B. LABOR VARIANCES (LABOR RATE AND EFFICIENCY VARIANCE)

AR × AH SR × AH SR × SH

Labor Rate Variance Labor Efficiency Variance

Total Labor Variance

C. OVERHEAD VARIANCES
FOUR WAY METHOD:

Actual VOH Budgeted VOH Applied VOH

AVR × AQ SVR × AQ SVR × SQ

Variable Spending Variable Efficiency

Total Variable Overhead Variance

Actual Fixed Budgeted FOH Applied FOH

AFR x AQ (budgeted) SP × SQ
 Fixed Spending Fixed Volume

Total Fixed Overhead Variance

Budgeted
Overhead
Based on
Standard
Budgeted Quantity
Total Actual Overhead Allowed for Total Applied
Overhead Based on Output Overhead
(VOH + FOH) Actual Hours Achieved (SP × SQ)

Spending Efficiency Volume

THREE WAY Variance Variance Variance

Budget Variance Volume

TWO WAY
(Controllable Variance) Variance (NonControllable)

Total Overhead Variance

ONE WAY

VARIANCES FOR MULTI-MATERIALS/LABOR

A. Material Price, Mix and Yield Variances

AQ AQ AQ SQ
x AM x AM x SM x SM
x AP x SP x SP x SP

Material Price Material Mix Material Yield

Total Material Variance

B. Labor Rate, Mix and Yield Variances

AH AH AH SH
x AM x AM x SM x SM
x AR x SR x SR x SR

Labor Rate Labor Mix Labor Yield

Total Labor Variance

Theory
1. One feature of standard costing is that
a. Historical costs are recorded as they are incurred
b. An analysis of costs variances is facilitated
c. Predetermined amounts are ignored
d. A selection of the costs units becomes simplified.
2. The best characteristics of a standard cost system is
a. Standard cost involves cost control which is cost reduction
b. All significant unfavourable variances should be reviewed
c. All variances from standard should be reviewed
d. Standard can pinpoint responsibility and help motivation
3. The accepted purpose of standard costing is
a. To assure a standard level of performance
 b. To control costs
c. To allocate the costs with more accuracy
d. To allocate costs to standard production effort
4. Which one of the following is least likely to be involved in establishing standard costs for evaluation
purposes?
a. Budgetary accountants
b. Industrial engineers
c. Top management
d. Quality control personnel
5. After the completion of production, standard and actual costs are compared to determine the
production process
a. Effectiveness c. Efficiency
b. Complexity d. Homogeneity
6. Standard costing can be used in
a. Only job order costing system c. Either job order or process costing system
b. Only process costing system d. Either manufacturing or retailing firms
7. Standard costing is least useful in
a. Measuring production efficiency
b. Simplifying costing procedures
c. Job order production systems
d. Determining minimum inventory levels
8. Which of the following statements regarding standard cost system is true?
a. Favourable variances are not necessarily good variances
b. Managers will investigate all variances from standard
c. The production supervisor is generally responsible for material price variances
d. Standard costs cannot be used for planning purposes since costs normally change in the future.
9. A predetermined overhead rate for fixed costs unlike a standard fixed costs per unit in that a
predetermined overhead rate is
a. Based on an input factor like direct labor hours and a standard cost per unit is based on a units
of output.
b. Based on practical capacity and standard fixed costs can be based on any level of activity.
c. Used with variable costing while a standard fixed costs is used with absorption costing
d. Likely to be higher than a standard fixed cost per unit.
10. Price standards are the responsibility of
a. Operations c. Accounting
b. Purchasing d. All of the above
11. A variance represents the difference between a budgeted and an actual cost. Thus, the variance
measures
a. Only controllable differences
b. Only uncontrollable differences
c. Both uncontrollable and controllable differences
d. The effectiveness of management
12. The two general types of variable cost variances are the
a. Rate variance and spending variance
b. Price variance and budget variance
c. Price variance and quantity variance
d. Quantity variance and efficiency variance
13. The terms “standard quantity allowed” or “standard hours allowed” mean
 a. The actual output in units multiplied by the standard output allowed.
b. The actual input in units multiplied by the standard output allowed
c. The actual output in units multiplied by the standard input allowed.
d. The standard output in units multiplied by the standard input allowed.
14. The difference between the actual and standard price input, multiplied by the actual quantity equals to
a. Price(rate) variance c. Spending variance
b. Controllable variance d. Quantity (usage) variance
15. Which set of terms describes the same type of variance?
a. Price variance, rate variance, use variance
b. Price variance, rate variance, efficiency variance
c. Use variance, efficiency variance, quantity variance
d. Use variance, efficiency variance, spending variance
16. The material price variance should be computed
a. When materials are purchased
b. When materials are used in production
c. Based upon the amount of materials used in production when only a portion of materials
purchased is actually used.
d. Based upon the difference between the actual quantity of inputs and the standard quantity
allowed for output times the standard price
17. The direct material mix variance is the
a. Average of the direct materials mix variances for each input
b. Sum of the direct materials mix variances for each input
c. Difference between the direct materials mix variances for each input
d. Multiple of the direct material mix variances for each input
18. The standard overhead cost assigned to each unit of product manufactured is called the
a. Total manufacturing cost c. Applied overhead costs
b. Predetermined overhead cost d. Estimated overhead costs
19. Under the two variance method for analyzing factory overhead, the controllable variance is the
difference between the
a. Actual factory overhead and the budget allowance based on standard hours allowed
b. Actual factory overhead and the factory overhead applied to production
c. Actual factory overhead and the budgeted fixed overhead
d. Budget allowance based on standard hours allowed and the factory overhead applied to
production.
20. Which standard cost variance represents the difference between actual factory overhead incurred and
the budgeted factory overhead based on actual hours worked?
a. Volume variance c. Efficiency variance
b. Spending variance d. Quantity variance

STANDARD COSTING COMPUTATION:

1. Swagger Corporation is developing standards for its products. One product requires an input that is
purchased for P62.00 per kilogram from the supplier. By paying cash, the company gets a discount of
6% off this purchase price. Shipping costs from the supplier’s warehouse amount to P4.45 per
kilogram. Receiving costs are P0.50 per kilogram. Each unit of output requires 0.48 kilogram of this
output. The allowance for waste and spoilage is 0.04 kilogram of this input for each unit of output. The
allowance for rejects is 0.13 kilogram of this input for each unit of output. Compute the following:
 a. Standard price per kilogram of input
b. Standard kilograms of input per unit of output
c. Standard material cost per unit of product

2. Pittman Corporation is developing direct labor standards. The basic direct labor wage rate is P13.90 per
hour. Employment taxes are 10% of the basic wage rate. Fringe benefits are P4.28 per hour. A
particular product requires 0.90 direct labor-hours per unit. The allowance for breaks and personal
needs is 0.07 direct labor-hours per unit. The allowance for cleanup, machine downtime, and rejects is
0.12 direct labor-hours per unit.
a. Standard rate per direct labor hour
b. Standard direct labor hour per unit of product
c. Standard labor cost per unit of product

3. Dahl Company, a clothing manufacturer, uses a standard costing system. Each unit of a finished
product contains 2 yards of cloth. However, there is unavoidable waste of 20%, calculated on input
quantities, when the cloth is cut for assembly. The cost of the cloth is P3 per yard. The standard direct
material cost for cloth per unit of finished product is:

VARIANCE ANALYSIS
DIRECT MATERIAL AND LABOR VARIANCES:
4. AAA Company use the following information for May 2015: Actual Cost – 4,600 @ P5.50 and Standard
Cost – 4,500 @P6.00. Compute the Material Variances

5. BBB Company makes iron table and chair sets. During May, the purchasing agent bought 12,800
pounds of scrap iron at P0.89 per pound. During the month, 10,700 pounds of scrap iron were used to
produce 300 table and chair sets. Each set requires a standard quantity of 35 pounds at a standard cost
of P0.85 per pound. Compute the material variances.

6. In May CCC Company costs and quantities of paper consumed in 2015: Actual unit purchase price –
P0.075 per page; Standard quantity allowed for good production – 195,800 pages; Actual quantity
purchased during May – 230,000 pages; Actual quantity used in May – 200,000 pages; Standard unit
price – P0.080 per page. Compute the Material variances.

7. The following data relate to direct labor costs for the current period: Standard costs – 7,500 @P11.60;
Actual Cost – 6,000 hrs @P12.00. Compute the Labor Variances.

8. During the month, 1,200 units of plates were produced. Actual direct labor required was 650 direct
labor hours at an actual total cost of P6,370. According to the standard cost card for plates, half an
hour of labor should be required per unit of plates produced, at a standard cost of P10 per labor hour.
Compute the Labor variances.

9. Find the missing information based on the following cases:

Case A Case B Case C Case D
Units Produced 800 ? 240 1,500
Standard hours per unit 3 0.80 ? ?
Standard hours allowed ? 600 480 ?
Standard rate per hour P7 ? 9.50 P6
 Actual hours worked 2,330 675 ? 4,875
Actual labor cost ? ? P4,560 P26,812.50
Labor rate variance P466 F P1,080F P228U ?
Labor efficiency variance ? P780U ? P2,250U

OVERHEAD VARIANCES
10. FFF Company uses a standard cost system for its production process and applies overhead based on
direct labor hours. The following information is available for August when FFF made 4,500 units:
Standard: Actual:
DLH per unit 2.50 DLH 10,000
Variable OH per DLH P1.75 VOH P26,250
Fixed OH per DLH P3.10 FxOH P38,000
Budgeted VOH P21,875
Budgeted FixedOH P38,750
Compute the Variance under Four Way, Three Way, Two Way and One Way

11. GGG Company has a fully automated bicycle production facility in which almost 97 percent of
conversion costs are driven by machine hours. The cost accountant of the company has computed the
variances: Variable Spending Variance – P37,000 F; Variable Efficiency Variance – P20,060 F; Fixed
Spending Variance – P14,000 U; Fixed Volume Variance – P17,000 U. The budgeted fixed overhead is
P500,000; the predetermined variable and fixed OH rates are P10 and P20 per machine hour
respectively, and budgeted capacity is 10,000 units. Compute the following
a. Standard number of machine hours allowed for each unit of output
b. The number of actual hours worked
c. Total spending variance

12. The manager of DDD Company of Transportation has determined that it typically takes 30 minutes for
the department employees to register a car. In Cebu City, the fixed overhead rate computed on an
estimated 4,000 direct labor hours is P8 per direct labor hour, whereas the variable overhead rate is
estimated to be P3 per direct labor hour.
During May, 7,600 cars were registered in Cebu City and 3,700 direct labor hours were worked
in registering those vehicles. For the month, variable overhead was P10,730 and fixed overhead was
P29,950. Using four way analysis, compute the variances.

13. EEE Company set 5,000 direct labor hours as the 2014 monthly capacity measure for computing its
predetermined variable overhead rate. At that level, budgeted variable overhead costs are P22,500.
EEE will apply budgeted fixed overhead of P9,900 on the basis of 275 budgeted machine hours for the
month.
During March 2014, EEE incurred 4,900 direct labor hours and 250 machine hours. Variable and
fixed overhead were P21,275 and P10,600 respectively. The standard times allowed for March
production were 4,955 direct labor hours and 240 machine hours. Using the four way analysis,
compute the variances.

14. (Three Way) The normal capacity of HHH Company Die Cutting Department is 4,500 machine hours per
month. At normal capacity, the standard factory overhead rate is P24.80 per machine hour, based on
budgeted fixed factory overhead rate of P85,500 per month and a variable overhead rate of P5.80 per
machine hour. During July, the department operated at 4,600 machine hours, with actual factory
 overhead of P121,000. The number of standard machine hours allowed for the production actually
attained is 4,200. Compute the Spending, Efficiency and Volume Variance.

15. (Three Way) III Company has developed the following standard factory overhead costs for each II unit
assembled in Department III based on the monthly capacity of 80,000 direct labor hours: Variable OH –
2hours@P6 per hour. Fixed Overhead – 2hours@P3per hour. During august, 38,000 units of II were
actually produced. Actual direct labor hours totalled 77,500 and actual factory overhead totalled
P700,000. Compute the Spending, Variable and Volume Variance.

16. (Two Way) The normal capacity of JJJ Company Assembly Department is 12,000 machine hours per
month. At normal capacity, the standard factory overhead rate is P12.50 per machine hour, based on
P96,000 of budgeted fixed cost per month and a variable cost rate of P4.50 per machine hour. During
April, the department operated at 12,500 machine hours, with actual factory overhead of P166,000.
The number of standard machine hours allowed for the production actually attained is 11,000.
Compute the controllable and volume variance.

17. (Two Way) KKK Company applies overhead using machine hours. The total overhead application rate is
P40 per hour based on a normal capacity of 24,000 machine hours. Overhead is 30% variable and 70%
fixed. Each unit of product requires 12 machine hours. During September, KKK Company produced
2,300 units of product and incurred 25,000 machine hours. Actual overhead cost for September was
P1,000,000. Compute the controllable and volume variance.

Multiple products Variance Analysis

18. Actual Data:
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: 1,950 hours @ P11.90 per hour
Unskilled Labor: 1,300 hours @ P7.15 per hour

Standard Data: (Per drum)

Material A: 30.25 gallons @P1.25 per gallon
Material B: 24.75 gallons @P2.00 per gallon
Skilled Worker: 4 hours @P12 per hour
Unskilled Worker: 2 hours@ P7 per hour
During the current month Classic Cleaning Company manufactured 500 55-gallon drums.
Compute the Material and Labor Price, Mix and Yield Variances.

Additional Exercises
19. Tub Company uses a standard cost system. The following information pertains to direct labor for
product B for the month of October: Standard hours allowed for actual production - 2,000;
Actual rate paid per hour - P 8.40; Standard rate per hour - P 8.00; Labor efficiency variance - P1,600
U. What were the actual hours worked?
a. 1,800 b. 1,810 c. 2,190 d. 2,200
20. Information on Hanley’s direct labor costs for the month of January is as follows: Actual direct labor
rate - P7.50; Standard direct labor hour allowed- 11,000; Actual direct labor hour - 10,000; Direct
labor rate variance favourable- P 5,500. The standard direct labor rate in January was
a. P6.95 b. P7.00 c. P8.00 d. P8.05

21. Information on Dean Company’s direct-material costs for the month of January 2016 was as follows:
Actual quantity purchased- 18,000; Actual unit purchase price - P 3.60; Materials purchase price
variance-unfavorable (based on purchases)- P 3,600; Standard quantity allowed for actual production-
16,000; Actual quantity used - 15,000. For January 2016 there was a favorable direct material usage
variance of
a. P3,360 b. P3,375 c. P3,400 d. P3,800

22. Troop Company had budgeted 50,000 units of output using 50,000 units of raw materials at a total
material cost of P100,000. Actual output was 50,000 units of product requiring 45,000 units of raw
materials at a cost of P2.10 per unit. The direct material price variance and usage variance were:
Price Usage
a. P 4,500 unfavorable P10,000 favorable
b. P 5,000 favorable P10,500 unfavorable
c. P 5,000 unfavorable P10,500 favorable
d. P10,000 favorable P 4,500 unfavorable

23. Below are Russel Corporation’s standard costs to produce one concrete table: Direct raw materials –
2kgs@P375 per kg, Direct labor – 30minutes @ P31.25 per hour. In September, Russel produced 250
concrete tables. Five hundred twenty kgs of raw materials were used at a total costs of P193,440. A
total of 128 direct labor hours were used ata a cost of P4,096. The direct labor rate variance is:
a. P22.50 b. P93.00 c. P64.75 d. P96.00

24. The information on Donnie Company’s direct labor costs for the month of January 2016 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 – favourable -P3,200 What is Donnie’s direct labor rate
variance?
a. P17,250 unfavorable. C. P21,000 unfavorable.
b. P20,700 unfavorable. D. P21,000 favorable.

25. Cox Company's direct material costs for the month of January were as follows:Actual quantity
purchased - 18,000 kilograms; Actual unit purchase price - P 3.60 per kilogram; Materials price
variance--unfavorable (based on purchases)- P 3,600; Standard quantity allowed for actual production
- 16,000 kilogram; Actual quantity used - 15,000 kilograms. For January there was a favorable direct
material quantity variance of:

26. 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 P53,000; the materials quantity variance was P1,875
Unfavorable; and the standard quantity of materials allowed for July production was 21,750 pounds.
The materials price variance for July was:

27. During March, Younger Company's direct material costs for product T were as follows: Actual unit
purchase price - P6.50 per meter; Standard quantity allowed for actual production - 2,100 meters;
Quantity purchased and used for actual production - 2,300 meters; Standard unit price - P6.25 per
meter. Younger's material quantity variance for March was:

28. Information on Kennedy Company's direct material costs follows:Standard price per pound of raw
materials - P3.60; Actual quantity of raw materials purchased - 1,600 pounds; Standard quantity
 allowed for actual production - 1,450 pounds; Materials purchase price variance—favorable- P 240.
What was the actual purchase price per unit, rounded to the nearest centavos?

29. The Fletcher 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 favorable. The standard quantity of material allowed for October
production is:

30. Yola Company manufactures a product with standards for direct labor of 4 direct labor-hours per unit
at a cost of P12.00 per direct labor-hour. During June, 1,000 units were produced using 4,100 hours at
P12.20 per hour. The direct labor efficiency variance was:

31. The following labor standards have been established for a particular product: Standard labor hours per
unit of output - 1.7 hours; Standard labor rate - P14.05 per hour. The following data pertain to
operations concerning the product for the last month: Actual hours worked - 3,700 hours ; Actual total
labor cost - P50,690; Actual output - 2,300 units. What is the labor rate variance for the month?

32. Lab Corp. uses a standard cost system. Direct labor information for Product CER for the month of
October follows: Standard direct labor rate - P6.00 per hour; Actual direct labor rate paid - P6.10 per
hour; Standard hours allowed for actual production - 1,500 hours; Labor efficiency variance—
unfavorable - P600.What are the actual hours worked?

33. The standards for direct labor for a product are 2.5 hours at P8 per hour. Last month, 9,000 units of the
product were made and the labor efficiency variance was P8,000 F. The actual number of hours
worked during the past period was:

34. The following standards for variable manufacturing overhead have been established for a company
that makes only one product: Standard hours per unit of output - 7.8 hours; Standard variable
overhead rate - P12.55 per hour. The following data pertain to operations for the last month: Actual
hours - 2,900 hours; Actual total variable overhead cost - P36,975; Actual output - 200 units. What is
the variable overhead efficiency variance for the month?

35. The following standards for variable manufacturing overhead have been established for a company
that makes only one product: Standard hours per unit of output - 5.6 hours; Standard variable
overhead rate - P12.00 per hour. The following data pertain to operations for the last month: Actual
hours - 2,600 hours; Actual total variable overhead cost- P31,330; Actual output - 400 units. What is
the variable overhead spending variance for the month?

36. Seegar Company uses a standard cost system for its production process and applies overhead based
on direct labor hours. The following information is available for August when Seegar made 4,500 units:
Standard:
DLH per unit 2.50
Variable overhead per DLH P1.75
Fixed overhead per DLH P3.10
Budgeted variable
P21,875
overhead
Budgeted fixed overhead P38,750

Actual:
Direct labor hours 10,000
Variable overhead P26,250
Fixed overhead P38,000
Using the two-variance approach, what is the controllable variance?
 37. Refer to Seegar Company. Using the three-variance approach, what is the spending variance?

38. One unit requires 2 direct labor hours to produce. Standard variable overhead per unit is P1.25 and
standard fixed overhead per unit is P1.75. If 330 units were produced this month, what total amount of
overhead is applied to the units produced?

39. United Company uses a standard cost system and prepared the following budget at normal capacity for
March:

Direct labor hours 24,000

Variable OH P48,000
Fixed OH P108,000
Total OH per DLH P6.50

Actual data for March were as follows:

Direct labor hours worked 22,000
Total OH P147,000
Standard DLHs allowed for capacity attained 21,000
Using the two-way analysis of overhead variances, what is the controllable variance for March?

40. The following information is available from the Kennedy Company: Actual OH – P15,000; Fixed OH
expenses, actual – P7,200; Fixed OH expenses, budgeted – P7,000; Actual hours – 3,500; Standard
hours – 3,800; Variable OH rate per DLH- P2.50.Assuming that Kennedy uses a three-way analysis of
overhead variances, what is the overhead spending variance?

41. Ewing Company uses a two-way analysis of overhead variances. Selected data for the November
production activity are as follows: Actual variable OH incurred – P196,000; Variable OH rate per MH –
P6; Standard MHs allowed – 33,000; Actual MHs – 32,000. Assuming that budgeted fixed overhead
costs are equal to actual fixed costs, the controllable variance for November is?

42. Occidental Company has developed standard overhead costs based on a capacity of 180,000 machine
hours as follows: Standard costs per unit: Variable – 2hours @P3; Fixed – 2hours@P5. During June,
85,000 units were scheduled for production, but only 80,000 units were actually produced. The
following data relate to June: Actual machine hours used were 165,000; Actual overhead incurred
totaled P1,378,000 (P518,000 variable plus P860,000 fixed).All inventories are carried at standard cost.
The variable overhead spending variance for June was?

43. Alcatraz Company uses the equation P400,000 + P1.75 per direct labor hour to budget manufacturing
overhead. Alcatraz has budgeted 125,000 direct labor hours for the year. Actual results were 110,000
direct labor hours, P397,000 fixed overhead, and P194,500 variable overhead. The variable overhead
spending variance for the year is.

44. Waldorf had a P10,000 unfavorable fixed overhead budget variance, a P6,000 unfavorable variable
overhead spending variance, and a P2,000 favorable volume variance. The total overhead was?

45. Sheridan Manufacturing Company uses a standard cost system. The following information pertains to
2015. Actual OH costs (P22,000 fixed) – P53,500; Actual Direct Labor costs (22,500 hours) – P175,500;
Standard direct labor for -11,000 units; Standard hours allowed – 22,000 hours; Labor rate – P8.00. The
Factory overhead rate is based on an activity level of 10,000 units. Standard cost data for 10,000 units
are: Variable FOH – P30,000; Fixed OH – P18,000. What is the fixed overhead volume variance for the
company?

46. Water Control Inc. manufactures water pumps and uses a standard cost system. The standard factory
overhead costs per water pump are based on direct labor hours and are as follows: Variable OH (4hrs
 of P8/hr); Fixed OH (4hrs at P5/hour based on a capacity of 100,000 DLH per month). The following
additional information is available for the month of November.
 22,000 pumps were produced although 25,000 had been scheduled for production.
 94,000 direct labor hours were worked at a total cost of P940,000.
 The standard direct labor rate is P9 per hour.
 The standard direct labor time per unit is 4 hours.
 Variable overhead costs were P740,000.
 Fixed overhead costs were P540,000.
The fixed overhead spending variance for November was?

47. The summarized flexible budget of AAA, Inc. is shown below:

Percent of Normal Operating
Capacity
80% 90% *100% 110%
Variable overhead P25,000 P30,000 P35,000 P40,000
Fixed overhead 50,000 50,000 50,000 50,000
Total Factory overhead P75,000 P80,000 P85,000 P90,000
* Normal capacity
According to standards established, 150,000 units of the product should be manufactured at its
normal capacity. Standard labor time per unit of products is ten minutes. Actual production in 1986
was 132,000 units in 24,000 hours. What is the standard fixed factory overhead rate?

48. The standard fixed factory overhead rate is based on 100% capacity of 90,000 direct labor hours. The
standard costs and the actual costs for factory overhead for the production of 14,000 units during the
current month were as follows: Standard: 80,000 hours at P1.50 – P120,000; Actual OH: 81,000 DLH –
P131,200. If there was a P9,000 unfavourable volume variance for December, what is the standard
fixed factory overhead cost rate?

49. Information on ADA Company’s direct labor costs for the month of January is as follows: Actual Direct
Labor hours – 86,250; Standard direct labor hours – 87,500; Total direct labor payroll – P603,750;
Direct labor efficiency variance – CR – P8,000. What is ADA’s direct labor rate variance?
a. P52,500 Fav b. P52,500 Unfav c. P51,750 Unfav d. P43,125 Unfav

50. ACA uses a standard costing system in the manufacture of its single product. The 87,500 units of raw
material in inventory were purchased for P262,500 and two units of raw materials are required to
produce one unit of final product. In November, the company produced 30,000 units of product. The
standard allowed for material was P150,000, and there was an unfavorable quantity variance of
P6,250. Compute the ACA’s (1) standard price for one unit of material and (2) the units of material
used to produce November output:
a. P5.00 and 62,500 units c. P3.00 and 60,000 units
b. P2.50 and 62,500 units d.P2.50 and 57,500 units

51. The data below relate to the month of April 2012 for Tim Inc. which uses a standard cost system:
Actual direct labor cost – P43,400; Actual hours used – 14,000; Standard hours allowed for good
output- 15,000; Direct labor rate variance (debit) – 1,400; Actual total overhead – P32,000; Budgeted
fixed cost – P9,000; Normal activity in hours -12,000. Total application rate per standard direct labor
hour – P2.25. How much is the controllable variance for April 2012?
a. P500F b. P500 U c. P2,250 F d. P2,250 U
52. Based on the above information, how much is the volume variance for April 2012?
a. P500 F b. P500 U c. P2,250F d. P2,250 U

53. The normal capacity of Department C is 6,000 direct labor hours per month. At normal capacity, the
standard factory overhead rate is P22 per direct labor hour, based on P96,000 of budgeted fixed
expenses per month and a variable expense rate of P6 per direct labor hour. During February, the
department operated at 5,600 direct labor hours, with actual factory overhead of P130,000 (P86,250
fixed). The number of standard direct labor hours allowed for the production actually attained is 5,700.
Using three way compute and determine the spending variance?
54. Base on the above information, the efficiency variance will be?

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