Standard Costing and Variance Analysis

1. Which of the following type of standards would be used for budgetary control purposes?

A. Basic standards.
B. Ideal standards.
C. Current standards.
D. Attainable standards.

2. What best describes a standard cost used for planning purposes in the next year of
operation?

A. The historic cost of a unit of output from previous years.

B. The expected cost of what the product should cost in the forthcoming year.
C. A target cost of what the company wants to achieve including no losses, idle time or
inefficiencies.
D. The current cost of manufacture.

3. The following expected costs are given for a product HH:

Material
A 3 kg at $5/kg
B 5 litres at $8/litre
Labour
Assembly dept 3 hours at $7/hours
Production dept 4 hours at $6/hours
Variable overhead is absorbed on labour hours at $12/hours, fixed overhead has been
calculated at $/hour based on budgeted production of 2,000 units.

If we use a marginal costing basis for setting standards what will the standard cost per unit
be?

A. $100
B. $148
C. $184
D. $226

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4. A company has produced and sold 6,000 units against a budgeted level of activity of 6,500
units. The standard selling price is $23/unit and the actual price achieved was $24.5/unit.
The standard variable cost per unit is $16/unit and the fixed overhead is budgeted at
$32,500.

What is the selling price variance and sales volume variance under absorption costing
principles?

Sales price variance Sales volume variance

A. $9,000 Fav $3,500 Adv
B. $9,000 Adv $1,000 Adv
C. $9,000 Fav $1,000 Adv
D. $9,000 Adv $3,500 Adv

5. Material costs for a product are as follows:

Budgeted units 1,150 units
Standard 4 kg/unit at $7/kg
Actuals
Output 1,100 units
Material used 5,000 kg costing $34,120
What are the material price and usage variances?

Material price variance Material usage variance

A. $880 Fav $4,200 Adv
B. $880 Adv $2,800 Adv
C. $880 Adv $4,200 Adv
D. $880 Fav $2,800 Adv

6. The labour variances have been calculated as follows

Labour rate variance $800 Fav

Labour efficiency variance $1,240 Fav

1,350 units have been produced at a cost of $23,540. The original budgeted units were
1,200 units.

What is the standard labour cost per unit?

A. $15.93/unit.
B. $17.44/unit.

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C. $18.95/unit.
D. $21.32/unit.
The following information is used for the next two questions:
The variable overhead cost is $21/unit. Variable overheads are absorbed based on
machine hours. Each unit requires 6 hours and 3,000 units are budgeted. The actual
output is 3,450 units, we incurred $74,000 during the period and worked 23,426
machine hours.

7. What is the variable overhead expenditure variance?

A. $9.450 Fav.
B. $7,991 Fav.
C. $9,541 Fav.
D. $11,000 Fav.

8. What is the variable overhead efficiency variance?

A. $9,450 Fav.
B. $7,991 Fav.
C. $9,541 Fav.
D. $11,000 Fav.

This information relates to the next three questions.

The following information is provided regarding fixed overhead costs.

Budget Actual
Units 1,300 units 1,260 units
Hours 3,900 hours 4,020 hours
Cost $17,550 $18,140

9. What is the fixed overhead expenditure variance?

A. $1,080 Fav.
B. $540 Fav.
C. $590 Adv.
D. $1,080 Adv.

10. What is the fixed overhead efficiency variance?

A. $1,080 Fav.

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B. $540 Fav.
C. $590 Adv.
D. $1,080 Fav.

11. What is the fixed overhead capacity variance?

A. $1,080 Fav.
B. $540 Fav.
C. $590 Adv.
D. $1,080 Fav.

12. Which of the following best explain a favorable material usage variance?

i. Lower quality of material

ii. Higher skill level of labour
iii. Exchange rate moving in our favour

A. (i) only.
B. (ii) only.
C. (i) and (ii).
D. (ii) and (iii).

13. Which of the following could lead to a fixed overhead capacity variance?

i. Higher sales than expected.

ii. Capacity constraints in the process.
iii. Poor budgeting of fixed overhead cost base.

A. (i) only.
B. (ii) only.
C. (i) and (ii).
D. (ii) and (iii).

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There are three questions relating to this information.

The budgeted contribution for a department is $50,000. Budgeted fixed costs are $10,000.
The department operates a standard marginal costing system.
The variances for the department are as follows:

$
Sales price variance 2,000 Adv
Sales volume variance 4,500 Fav
Total material variance 10,300 Fav
Total labour variance 8,400 Adv
Total variable overhead variance 4,500 Adv
Total fixed overhead variance 8,400 Fav
14. What is the standard contribution of actual sales?

A. $52,500.
B. $49,900.
C. $54,500.
D. $60,000.

15. What is the actual contribution?

A. $52,500.
B. $49,900.
C. $58,300.
D. $60,000.

16. What is the actual profit?

A. $52,500.
B. $49,900.
C. $58,300.
D. $48,300.

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17. Bowen has established the following with regard to fixed overheads for the past month.

Actual costs incurred $132,400

Actual units produced 5,000 units
Actual labour hours worked 9,950 hours
Budgeted costs $135,000
Budgeted units of production 4,500 hours
Budgeted labour hours 9,000 hours

Overheads are absorbed on a labour hour basis.

What was the fixed overhead capacity variance?

A. $750 favourable.
B. $11,250 favourable.
C. $22,500 favourable.
D. $11,250 adverse.

18. A company is reviewing actual performance to budget to see where there are differences.
The following standard information is relevant:

$ per unit
Selling price 50
Direct materials 4
Direct labour 1
Fixed production overheads 5
Variable production overheads 10

Budgeted sales units 3,000

Actual sales unit 3,500

What was the favourable sales volume variance using marginal costing?

A. $19,500.
B. $17,500.

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C. $17,000.
D. $16,500.

19. A company uses variance analysis to control costs and revenue.

Information concerning sales is as follows:

Budgeted selling price $15 per unit

Budgeted sales units 10,000 units.
Budgeted profit per unit $5 per unit
Actual sales revenue $151,500
Actual units sold 9,800 units

What is the sales volume profit variance?

A. $500 favourable.
B. $1,000 favourable.
C. $1,000 adverse.
D. $3,000 adverse.

20. The following information relates to labour costs for the past month:

Budget Labour rate $10 per hour

Production time 15,000 hours
Time per unit 3 hours
Production units 5,000 units
Actual wages paid $176,000
Production 5,500 units
Total hours worked 14,000 hours
There was no idle time.

What were the labour rate and efficiency variances?

Rate variance Efficiency variance

A. $26,000 adverse $25,000 favourable

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B. $26,000 adverse $10,000 favourable
C. $36,000 adverse $10,000 favourable
D. $36,000 adverse $25,000 favourable

21. A company uses a standard absorption costing system. Last month budgeted production
was 8,000 units and the standard fixed production overhead cost was $15 per unit. Actual
last month was 8,500 units and the actual fixed production overhead cost was $17 per
unit.

What was the total adverse fixed production overhead variance for last month?

A. $7.500.
B. $16,000.
C. $17,000.
D. $24,500.

The following information relates to the following two questions:

A company operating a standard costing system has the following direct labour
standards per unit for one of its products: 4 hours at $12.50 per hour.
Last month when 2,195 units of the product were manufactured, the actual direct
labour cost for the 9,200 hours worked was $110,750.

22. What was the direct labour rate variance for last month?

A. $4,250 favourable.
B. $4,250 adverse.
C. $5,250 favourable.
D. $5,250 adverse.

23. What was the direct labour efficiency variance for last month?

A. $4,250 favourable.
B. $4,250 adverse.
C. $5,250 favourable.

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D. $5,250 adverse.

24. Last month 27,000 direct labour hours were worked at an actual cost of $236,385 and the
standard direct labour hours of production were 29,880. The standard direct labour cost
per hour was $8.50.
What was the labour efficiency variance?

A. $17,595 Adverse.
B. $17,595 Favourable.
C. $24,480 Adverse.
D. $24,480 Favourable.
25. Last month a company’s budgeted sales were 5,000 units. The standard selling price was
$6 per unit with a standard contribution to sales ratio of 60%. Actual sales were 4,650
units with total revenue of $30,225.
What were the favourable sales price and adverse sales volume contribution variances?

Sales price Sales volume contribution

$ $

A. 2,325 1,260
B. 2,500 1,260
C. 2,325 2,100
D. 2,500 2,100

26. A company has the following information in relation to variable overheads for a particular
month:

Expenditure variance $2,000 adverse

Efficiency variance $8,000 favourable

The variable overhead absorption rate was calculated on the basis of budgeted overheads
of $108,000 for production of 4,500 units. Budgeted labour hours were 13,500. Actual
production was 4,000 units
What is the actual variable overhead cost for the month (to the nearest $)?
$____________________

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27. A company has the following information available for a particular month.

Budget:
Sales 8,000 units
Selling price $20/unit
Variable cost $8/unit
Fixed cost $4/unit
Actual sales revenue was $148,200 for 7,800 units.

What is the adverse sales volume variance using marginal and absorption costing systems?

Marginal costing Absorption costing

A. $2,400 $1,600
B. $1,600 $2,400
C. $2,200 $1,400
D. $1,400 $2,200

28. A company has the following information relation to fixed overhead variance for the
month:

Fixed overhead efficiency variance $3,000 favourable

Fixed overhead capacity variance $10,000 adverse
Fixed overhead expenditure variance $5,000 favourable

Fixed overheads are absorbed on a labour hours basis.

Which of the following statements are not correct?

i. Fixed overheads were under absorbed by $2,000.

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ii. The number of labour hours available were more than budgeted.
iii. The number of labour hours available were less than budgeted.
iv. Fixed overheads were over absorbed by $8,000.

A. (i) and (ii).

B. (iii) and (iv).
C. (i) and (iii).
D. (ii) and (iv).

29. Which of the following would not contribute to a favourable fixed overhead volume
variance?

A. Actual number of units produced higher than budgeted.

B. Actual fixed cost per unit less than budgeted.
C. Favourable fixed overhead efficiency and capacity variances.
D. Production budget calculation was incorrect.

The following information relates to the next three questions.

A company has a budgeted contribution of $34,000 and budgeted profit of $15,000 for
a month. At the end of the month, the following variances are calculated:

Favourable Adverse
Sales volume 2,000
Sales price 3,000

Material price 4,000

Material usage 1,000

Labour efficiency 1,500

Labour rate 2,200

Variable expenditure 3,500

Variable efficiency 1,000
Fixed expenditure 5,000

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30. What is the standard contribution of actual sales?

A. $33,000.
B. $34,800.
C. $36,000.
D. $39,800.

31. What is the actual profit?

A. $15,800.
B. $20,800.
C. $34,800.
D. $39,800.

32. What were the actual fixed costs for the period?

A. $5,000.
B. $14,000.
C. $19,000.
D. $24,000.

33. Which of the following is true in relation to marginal costing operating statements:

A. Actual contribution is calculated by adjusting the budget contribution for variable cost
variances only.
B. Actual profit is calculated by adjusting actual contribution for any fixed volume variances.
C. Standard contribution of actual sales is calculated by adjusting budgeted contribution for
sales volume variance only.
D. Actual contribution is calculated by adjusting the budgeted contribution for sale
variances, variable cost variance and fixed cost variances.

34. Which of the following is not true in relation to absorption costing operating statements:

A. Standard profit for actual sales is calculated by adjusting the budgeted profit for the sales
volume variance only.

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B. Standard contribution for actual sales is calculated by adjusting the budgeted profit for
the sales volume variance only.
C. Actual profit is calculated by adjusting budgeted profit for all variances.
D. An advance fixed overhead capacity variance will decrease profits.

35. A company operates a standard absorption costing system. The standard fixed production
overhead rate is $15 per hour.

Actual hours worked 5,500

Budgeted hours 5,000
Standard hours for actual production 4,800

What was the fixed production overhead capacity variance?

A. $7,500 adverse.
B. $7,500 favourable.
C. $10,500 adverse.
D. $10,500 favourable.

36. Last month 27,000 direct labour hours were worked at an actual cost of $236,385 and the
standard direct labour hours of production were 29,880. The standard direct labour cost
per hour was $8.50

What was the labour efficiency variance?

A. $17,595 adverse
B. $17,595 favourable
C. $24,480 adverse
D. $24,480 favourable

The following information relates to the next 2 questions:

A company operating a standard costing system has the following direct labour standards
per unit for one of its products:
4 hours at $12.50 per hour.
Last month when 2,195 units of the product were manufactured, the actual direct labour
cost for the 9,200 hours worked was $110,750.

37. What was the direct labour rate variance for last month?

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A. $4,250 favourable.
B. $4,250 adverse.
C. $5,250 favourable.
D. $5,250 adverse.

38. What was the direct labour efficiency variance for last month?

A. $4,250 favourable.
B. $4,250 adverse.
C. $5,250 favourable.
D. $5,250 adverse.

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