STANDARD COSTING QUIZZER

1) Which of the following is a purpose of standard costing?

a. to simplify costing procedures and expedite cost reports
b.to replace budgets and budgeting
c. to use them as a basis for product costing for external reporting purposes
d. to eliminate having two accounts for under/overapplied factory overhead at the end of the product

2) A primary purpose of using a standard cost system is

a. to make things easier for managers in the production facility
b.to provide a distinct measure of cost control
c. to minimize the cost per unit of production
d. to minimize recording of certain recurring business transactions

3) Standard costs are least useful for

a. measuring production efficiency c. estimating future costs
b. simplifying costing procedures d. determining minimum inventory levels

4) Which of the following is true concerning standard costs?

a. standard costs are estimates of costs attainable only under the most ideal conditions, but rarely
practicable
b. standard costs are difficult to use with a process-costing system
c. if properly used, standards can help motivate employees
d. unfavorable variances, when material in amount, should be investigated, but larger variance need not be
investigated

5) A company using very high (tight) standards in standard cost system should expect that
a. no incentive bonus will be paid
b. most variances will be unfavorable
c. employees will be strongly motivated to attain the standards
d. costs will be controlled better than if lower standards were used

6) A standard costing system may be used in

a. job-order costing but not process costing
b. either job order or process costing
c. process costing but not job order costing
d. neither process costing nor job order costing

7) Which of the following is best identified with a system of standard costing?

a. variable costing c. standardized accounting system
b. management by exception d. contribution margin approach

8) “Management by exception”, in relation to standard costing, means

a. only large favorable variances need to be investigated
b. only large unfavorable variance need to be investigated
c. only large variances, favorable or unfavorable, need to be investigated
d. only small variances need to be investigated

9) What do you call the variation in the use of materials at the actual price and the use of materials at the
standard price?
a. materials price variance c. materials mix variance
b. materials usage variance d. materials yield variance

10) A credit balance in the material price variance indicates that

a. actual price exceeds standard price c. actual quantity exceeds standard quantity
b. standard price exceeds actual price d. standard quantity exceeds actual quantity

11) Information on RST-C’s direct material costs is as follows: Standard unit price P 3.60; Actual quantity
purchased 1,600; Standard quantity allowed for actual production 1,450; Materials purchase price variance,
favorable P 240. What was the actual purchase price per unit, rounded to the nearest centavo?

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a. P 3.06 c. P 3.45
b. P 3.11 d. P 3.75

12) What department is customarily held responsible for an unfavorable materials usage variance?
a. quality control c. purchasing
b. production d. engineering

13) If a company follows the practice of isolating variance 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 to the requesting department or division
b. when material is purchased
c. when material is used for production
d. when purchase order is originated

14) When performing input-output analysis in standard costing, standard hours allowed is a means of
measuring
a. standard output at standard hours c. standard output at actual hours
b. actual output at standard hours d. actual output at actual hours

15) The following data relate to direct labor costs for the current period: Standard costs 10,000 hours @ P
20; Actual costs 9,800 hours at P 19.50. The direct labor efficiency variance is
a. P 3,600 F c. P 4,000 F
b. P 3,600 UF d. P 4,000 UF

16) A debit balance in the direct labor efficiency variance indicates that
a. standard hours exceeds actual hours c. actual hours exceeds normal hours
b. actual hours exceeds standard hours d. normal hours exceed actual hours

17) XYZ-C’s direct labor costs for the month of March 2006 were as follows: standard direct labor hours
42,000; actual direct labor hours 40,000; direct labor rate variance (favorable) P 8,400; standard direct labor
rate per hour P 6.50. What was XYZ’s direct labor payroll for the month of March?
a. P 243,000 c. P 251,600
b. P 244,000 d. P 260,000

18) PQR-C’s operations for April disclosed the following data relating to direct labor: Actual cost P 10,000;
Rate variance (favorable) P 1,000; Efficiency variance (unfavorable) P 1,500; Standard cost P 9,500. Actual
direct labor hours for April amounted to 2,000. PQR’s standard direct labor rate per hour in April was
a. P 5.50 c. P 4.75
b. P 5.00 d. P 4.50

19) How is the idle time labor variance computed?

a. idle time x actual labor rate c. idle time x change in labor rate
b. idle time x standard labor rate d. no such variance

20) The flexible budget of ABC is summarized below:

80% 90% 100% 110%
Variable overhead P 21,000 P 23,000 P 25,000 P 27,000
Fixed overhead 50,000 50,000 50,000 50,000
Total overhead P 71,000 P 73,000 P 75,000 P 77,000
100,000 units of product are produced when the company operates at its normal capacity. The standard labor
time per unit is 15 minutes. Actual production for the year was 90,000 units of product in 44,000 hours. What
is the standard variable factory overhead rate per hour?
a. P 1.00 c. P 4.00
b. P 1.25 d. P 5.00

21) Under the three-variance method for analyzing factory overhead, budget or spending variance is computed
by subtracting from actual factory overhead cost incurred the
a. budget allowed based on actual input c. budget allowance based on standard input
b. budget allowed based on actual output d. budget allowed based on standard output

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Items 22 and 23 are based on the following information: JKL-C’s budgeted fixed factory overhead is P 50,000
per month, plus a variable factory overhead rate of P 4 per labor hour. The standard direct labor hours allowed
for October production was 18,000. An analysis of the factory overhead indicates that in October, JKL had an
unfavorable budget (controllable) variance of P 1,000 and a favorable volume variance of P 500. JKL uses a two
way analysis of overhead variance.
22) The actual factory overhead measured in October is
a. P 121,000 b. P 122,000 c. P 122,300 d. P 123,000
23) The applied (standard) factory overhead in October is
a. P 121,500 c. P 122,500
b. P 122,000 d. P 123,000

24) One way of analyzing the variable factory overhead variance is breaking it down into
a. variable overhead spending and efficiency variance
b. variable overhead spending and rate variance
c. variable overhead efficiency and volume variance
d. variable overhead spending and capacity variance

25) One way of analyzing the fixed factory overhead variance is breaking it down into
a. fixed overhead spending and volume variance
b. fixed overhead spending and budget variance
c. fixed overhead efficiency and volume variance
d. fixed overhead efficiency and capacity variance

Items 26 to 31 are based on the following information: ABC-C produces a single product. The standard cost card
for the product follows: Direct materials (4 yards at P 5 per yard) P 20; direct labor (1.5 hours @ P 10 per hour) P
15; variable manufacturing overhead (1.5 hours at P 4 per hour) P 6.
During a recent period, the company produced 1,200 units of product. Various costs associated with the
production of these units are given as follows: direct materials purchased (6,000 yards) P 28,500; direct materials
used in production 5,000 yards; direct labor cost incurred (2,100 hours) P 17,850; Variable manufacturing
overhead cost incurred P 10,080. The company records all variances at the earliest point in time. Variable
manufacturing overhead costs are applied to products on the basis of direct labor hours.

26) The material price variance for the period is

a. P 1,250 F b. P 1,500 F c. P 1,250 UF d. P 1,500 UF

27) The material quantity variance for the period is

a. P 950 UF b. P 1,000 UF. c. P 5,000 F d. P 5,000 UF

28) The labor rate variance for the period is

a. P 2,700 F b. P 2,700 UF c. P 3,150 F d. P 3,150 UF

29) The labor efficiency variance for the period is

a. P 3,000 UF b. P 3,000 F c. P 2,550 UF d. P 2,550 F

30) The variable overhead spending variance for the period is

a. P 1,440 F b. P 1,440 UF c. P 1,680 F d. P 1,680 UF

31) The variable overhead efficiency variance for the period is

a. P 1,200 UF b. P 1,200 F c. P 1,440 UF d. P 1,440 F

Items 32 and 33 are based on the following information: ABC-C’s standard direct labor rates in effect for the
fiscal year ending June 30 and standard hours allowed for the output in April are
Standard DL rate per hour Standard DL Hours allowed for Output
Engineering P 8.00 500
Carpentry P 7.00 500
Masonry P 5.00 500
The wage rates for each labor class increased on January 1 under the terms of a new union contract. The
standard wage rate was not revised.
Actual rate Actual DLH
Engineering P 8.50 550

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Carpentry P 7.50 650
Masonry P 5.40 375

32) How much is the labor yield variance?

a. P 500 b. P 320 c. P 820 d. P 515

33) How much is the labor mix variance?

a. P 50 b. P 325 c. P 66.67 d. P 500

END OF EXERCISE

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