Takehome Quiz a. P65,000 b. P57,000 c. P63,000 d.

P60,000
Multiple Choice (Show your solution in Good Form) Cole laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for
The Willard Manufacturing Co., Inc. uses standard cost systems in accounting for manufacturing costs. On June 1, one bag of Fastgro as follows:
2015, it started the manufacture of a new product known as “Whippy.” The standard costs of a unit of “Whippy” Standard Quantity Standard Cost per Bag
are: Direct material 20 pounds P 8.00
Direct labor 0.1 hours 1.10
Raw materials 3 kilos @ P1.00 per kilo P 3.00 Variable manufacturing overhead 0.1 hours 0.40
Direct labor 1 hour @ P4.00 per hour 4.00 The company had no beginning inventories of any kind on Jan. 1. Variable manufacturing overhead is applied to
Overhead 75% of direct labor cost 3.00 production on the basis of direct labor hours. During January, the following activity was recorded by the company:
P10.00 • Production of Fastgro: 4,000 bags
The following data were obtained from Willard’s records for the month of June: • Direct materials purchased: 85,000 pounds at a cost of P32,300
Actual production of “Whippy” 2,000 units • Direct labor worked: 390 hours at a cost of P4,875
Units sold of “Whippy” 1,250 units • Variable manufacturing overhead incurred: P1,475
Debit Credit • Inventory of direct materials on Jan. 31: 3,000 pounds
6. The materials price variance for January is:
Sales P25,000
a. P1,640 F. b. P1,700 F. c. P1,640 U. d. P1,300 U.
Purchases P13,650 7. The materials quantity variance for January is:
a. P800 U. b. P300 F. c. P300 U. d. P750 F.
Materials price variance 650 8. The labor rate variance for January is:
a. P475 F. b. P585 F. c. P475 U. d. P585 U.
Materials quantity variance 500 9. The labor efficiency variance for January is:
a. P475 F. b. P130 U. c. P350 U. d. P110 F.
Direct labor rate variance 380 10. The total variance for variable overhead for January is:
a. P85 F. b. P100 U. c. P40 F. d. P125 F.
Direct labor efficiency variance 400
11. Margolos, Inc. ends the month with a volume variance of P6,360 unfavorable. If budgeted fixed
Manufacturing overhead total variance 250
factory O/H was P480,000, O/H was applied on the basis of 32,000 budgeted machine hours, and
The amount shown above for the materials price variance is applicable to raw materials purchased during June. budgeted variable factory O/H was P170,000, what were the actual machine hours (AH) for the
1. The actual quantity of raw materials used (in kilos) for the month of June is month?
a. 3,750 kilos b. 6,500 kilos c. 6,000 kilos d. 6,650 kilos a. 32,424 b. 31,687 c. 32,000 d. 31,576
2. The actual hours worked for the month of June is Parsons Co. uses a predetermined overhead rate based on direct labor hours to apply manufacturing
a. 1,900 hours b. 2,000 hours. c. 1,905 hours d. 2,100 hours.
overhead to jobs. Last year Parsons incurred P250,000 in actual manufacturing overhead cost. The
3. The actual total overhead for the month of June is
a. P3,750 b. P6,000 c. P5,750 d. P6,250
Manufacturing Overhead account showed that overhead was overapplied in the amount of P12,000 for
4. The actual direct labor rate for the month of June is the year.
a. P3.60 b. P4.00 c. P3.80 d. P4.20 12. If the predetermined overhead rate was P8.00 per direct labor hour, how many hours were worked
during the year?
MAXIM MFG CO., which uses a standard cost system, manufactures one product with the following standard costs a. 31,250 hours b. 32,750 hours c. 30,250 hours d. 29,750 hours
for labor and overhead:
Hughes Company uses the equation P375,000 + P1.20 per direct labor hour to budget manufacturing
Direct labor 1 hour at P8 8.00
overhead. Hughes had budgeted 75,000 direct labor hours for the year. Actual results were 81,000
Factory overhead 80% of direct labor 6.40
direct labor hours, P397,000 fixed overhead, and P94,500 variable overhead.
Total production in units 10,000 units 13. The total overhead variance for the year is
Actual labor cost 9,500 at P7.50 a. P2,700 b. P22,000 c. P10,700 d. P30,000
Factory overhead total variance P1,000 unfavorable 14. The variable overhead spending variance for the year is
5. The actual total factory overhead for the month of January is
 a. P2,700 b. P22,000 c. P10,700 d. P30,000 (4) Standard machine-hours allowed for actual output achieved 6,200 —
15. The fixed overhead budget variance for the year is (5) Fixed manufacturing overhead (per standard machine-hour) — —
a. P2,700 b. P22,000 c. P10,700 d. P30,000 Flexible-Budget Data:
16. The fixed overhead volume variance for the year is (6) Variable manufacturing overhead (per standard machine-hour) — P 42.00
(7) Budgeted fixed manufacturing overhead P 88,200 P20,000
a. P1,400 b. P15,600 c. P13,000 d. P30,000
(8) Budgeted variable manufacturing overhead — —
(9) Total budgeted manufacturing overhead — —
Additional Data:
(10) Standard variable manufacturing overhead allocated P124,000 —
The controller of Durham Skates is reviewing the production cost report for July. An analysis of direct (11) Standard fixed manufacturing overhead allocated P 86,800 —
materials costs reflects an unfavorable flexible budget variance of P25. The plant manager believes this (12) Production-volume variance — P 4,000 F
is excellent performance on a flexible budget for 5,000 units of direct materials. However, the production (13) Variable manufacturing overhead spending variance P 4,600 F P 2,282 F
supervisor is not pleased with this result because he claims to have saved P1,200 in material cost on (14) Variable manufacturing overhead efficiency variance — P 2,478 F
actual production using 4,900 units of direct materials. The standard materials cost is P12 per unit. (15) Fixed manufacturing overhead spending variance — —
Actual materials used for the month amounted to P60,025. (16) Actual machine-hours used — —
17. The actual average cost per unit for materials was
a. P12.00 b. P12.24 c. P12.01 d. P12.25 Problem 2 – Incomplete Records: Quinan Carpentry Co. makes wooden shelves. A small fire on October 1 partially
18. If the direct materials variance is investigated further, it will reflect a price variance of destroyed the records relating to September’s production. The charred remains of the standard cost card appear
here.
a. Zero. b. P1,225 U c. P1,200 F d. P2,500 F
Standard Quantity Standard Price
Media Co. manufactures televisions. The following direct labor information relates to the manufacture of televisions. Direct material 3.1 board feet
Number of workers 60 Direct labor P9.80 per hour
Number of productive hours per week, per worker 40 From other fragments of records and several discussions with employees, you learn the following:
Hours required to make 1 unit 3 • The purchasing agent’s files showed that 50,000 board feet had been purchased on account in September at
Weekly wages per worker P600 P1.05 per board foot. He was proud of the fact that this price was P0.05 below standard cost per foot.
Employee benefits treated as direct labor costs 20% of wages • There was no beginning inventory of raw material on September 1 and, since the raw material storage location
19. What is the standard direct labor cost per unit? is apart from the production facility, the fi re caused no damage to the remaining raw material. Fourteen
a. P54 b. P30 c. P36 d. P18 hundred board feet of raw material were on hand on October 1.
The auto repair shop of Empire Motor Sales uses standards to control labor time and labor cost in the shop. The • The standard quantity of material allowed for September’s production was 49,600 board feet.
standard time for a motor tune-up is 2.5 hours. The record showing time spent in the shop last week on tune-ups • The September payroll for direct labor was P39,494 based on 4,030 actual hours worked.
has been misplaced; however, the shop supervisor recalls that 50 tune-ups were completed during the week and • The production supervisor distinctly remembered being held accountable for 30 more hours of direct labor
the controller recalls that the labor rate variance on tune-ups was P87, favorable. The shop has a set standard than should have been worked. She was upset because top management failed to consider that she saved
labor rate of P9 per hour for tune-up work. The total labor variance for the week on tune-up work was P93, hundreds of board feet of material by creative efforts that required extra time.
unfavorable. a. How many units were produced during September?
20. The actual hourly rate of pay for tune-up work last week was: b. Calculate direct material variances for September.
a. P8.40 per hour. b. P9.00 per hour. c. P9.60 per hour. d. not in the choices c. What is the standard number of hours allowed for the production of each unit?
d. Calculate all direct labor variances for September.
Write a summary of your final answers and provide solution in any form
Problem 1 – Compute for the missing item: Consider the following two situations—cases A and B—independently. Problem 3 – Revising the Standards: ALOHA Corp., started in January 2010, manufactures Hawaiian muumuus. At
Data refer to operations for April 2015. For each situation, assume standard costing. Also assume the use of a that time, the following material and labor standards were developed:
flexible budget for control of variable and fixed manufacturing overhead based on machine-hours. Material 3.0 yards at P4 per yard
Cases Labor 1.5 hours at P6 per hour
A B In January 2016, ALOHA Corp. hired a new cost accountant, Anulu Haoki. At the end of the month, Haoki was
(1) Fixed manufacturing overhead incurred P 84,920 P23,180 reviewing the production variances and was amazed to find that the company’s material and labor standards had
(2) Variable manufacturing overhead incurred P120,000 — never been revised. Actual material and labor data for January, when 17,200 muumuus were produced, follow.
(3) Denominator level in machine-hours — 1,000 Material Purchased, 50,000 yards at P4.90
 Used 50,000 yards 6. How much actual variable manufacturing overhead cost was incurred during the period?
Labor 17,800 hours at P9.05 per hour
Material prices have risen 4 percent each year beginning in 2010 (six years through 2015), but the company can Problem 5: “Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our
now buy at 95 percent of regular price due to increased purchase volume. Also, direct material waste has been production people did a good job in controlling costs as well,” said Kim Clark, president of Martell Company. “Our
reduced from ¼ yard to 1/8 yard per muumuu; waste has always been included in the standard material quantity. P18,300 overall manufacturing cost variance is only 1.2% of the P1,536,000 standard cost of products made during
Beginning in 2010, each annual labor contract has specified a 7 percent cost-of-living adjustment. Revision of the the year. That’s well within the 3% parameter set by management for acceptable variances. It looks like everyone
plant layout and acquisition of more efficient machinery has decreased the labor time per muumuu by one-third will be in line for a bonus this year.” The company produces and sells a single product. The standard cost card for
since the company began. the product follows:
a. Determine the material and labor variances based on the company’s original standards. Standard Cost Card—per Unit of Product
b. Determine the new standards against which Haoki should measure the January 2016 results. (Round Direct materials, 2 feet at P8.45 per foot ...................................................................... P 16.90
adjustments annually to the nearest centavo.) Direct labor, 1.4 direct labor hours at P16 per direct labor-hour ................................... 22.40
c. Compute the variances for material and labor using the revised standards. Variable overhead, 1.4 direct labor-hours at P2.50 per direct labor-hour ..................... 3.50
Fixed overhead, 1.4 direct labor-hours at P6 per direct labor-hour .............................. 8.40
Problem 4: You have recently accepted a position with Vitex, Inc., the manufacturer of a popular consumer product. The following additional information is available for the year just completed:
During your first week on the job, the vice president has been favorably impressed with your work. She has been a. A total of 64,000 feet of material was purchased during the year at a cost of P8.55 per foot. There were no
so impressed, in fact, that yesterday she called you into her office and asked you to attend the executive committee beginning or ending inventories for the year.
meeting this morning for the purpose of leading a discussion on the variances reported for last period. Anxious to b. The company worked 43,500 direct labor-hours during the year at a direct labor cost of P15.80 per hour.
favorably impress the executive committee, you took the variances and supporting data home last night to study. c. Overhead is applied to products on the basis of standard direct labor-hours budgeted at 35,000 direct labor
hours. Data relating to manufacturing overhead costs follow:
On your way to work this morning, the papers were laying on the seat of your new, red convertible. As you were Actual variable overhead costs incurred ................................................................... P108,000
crossing a bridge on the highway, a sudden gust of wind caught the papers and blew them over the edge of the Actual fixed overhead costs incurred ........................................................................ P211,800
bridge and into the stream below. You managed to retrieve only one page, which contains the following 1. Compute the direct materials price and quantity variances for the year.
information: 2. Compute the direct labor rate and efficiency variances for the year.
STANDARD COST CARD 3. For manufacturing overhead compute:
Direct materials, 6 pounds at P3 per pound .................................................................... P18.00 a. The variable overhead rate/spending and efficiency variances for the year.
Direct labor, 0.8 direct labor-hours at P15 per direct labor-hour ..................................... P12.00 b. The fixed overhead budget and volume variances for the year.
Variable manufacturing overhead, 0.8 direct labor-hours at P3 per direct labor-hour ..... P2.40 c. Controllable variance
Total Variances Reported 4. Total the variances you have computed, and compare the net amount with the P18,300 mentioned by the
Standard Price Quantity or president. Do you agree that bonuses should be given to everyone for good cost control during the year?
Cost* or Rate Efficiency Explain.
Direct materials .................................... P405,000 P6,900 F P9,000 U
Direct labor .......................................... P270,000 P14,550 U P21,000 U
Variable manufacturing overhead ........ P54,000 P1,300 F P ? U
*Applied to Work in Process during the period.
You recall that manufacturing overhead cost is applied to production on the basis of direct labor-hours and that all
of the materials purchased during the period were used in production. Work in process inventories are insignificant
and can be ignored.

It is now 8:30 A.M. The executive committee meeting starts in just one hour; you realize that to avoid looking like a
bungling fool you must somehow generate the necessary “backup” data for the variances before the meeting
begins. Without backup data, it will be impossible to lead the discussion or answer any questions.
1. How many units were produced last period?
2. How many pounds of direct material were purchased and used in production?
3. What was the actual cost per pound of material?
4. How many actual direct labor-hours were worked during the period?
5. What was the actual rate paid per direct labor-hour?