The standards that allow for no machine breakdowns or other work interruptions and that require

peak efficiency at all times are referred to as

A. Normal standards
B. Practical standards
C. Ideal standards
D. Budgeted standards
ANSWER: C

To measure controllable inefficiencies, which of the following is the best basis for a company to
use in establishing standards allowed for the output of one unit of product?
A. Average historical performance for the last several years.
B. Engineering estimates based on ideal performance.
C. Engineering estimates based on attainable performance.
D. The hours per unit that would be required for the present workforce to satisfy expected
demand over the long run.
ANSWER: C

Which of the following statements concerning practical standards is incorrect?

A. Practical standards can be used for product costing and cash budgeting.
B. Practical standards can be attained by the average worker.
C. When practical standards are used, there is no reason to adjust standards if an old machine is
replaced by a newer, faster machine.
D. Under practical standards, large variances are less likely than under ideal standards.
ANSWER: C

If a company follows a practice of isolating variances 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
B. When material is purchased
C. When material is used in production
D. When production is completed
ANSWER: B

An unfavorable labor efficiency variance indicates that:

A. The actual labor rate was higher than the standard labor rate.
B. The labor rate variance must also be unfavorable.
C. Actual labor hours work exceeded standard labor hours for the production level achieved.
D. Overtime labor was used during the period.
ANSWER: C

A favorable labor rate variance indicates that

A. Actual hours exceed standard hours
B. Standard hours exceed actual hours
C. The actual rate exceeds the standard rate
D. The standard rate exceeds the actual rate
ANSWER: D
What does a credit balance in a direct labor efficiency variance account indicate?
A. The average wage rate paid to direct labor employees was less than the standard rate.
B. The standard hours allowed for the units produced were greater than the actual direct labor
hours used.
C. Actual total direct labor cost incurred were less than standard direct labor costs allowed for
the units produced.
D. The number of units produced was less than the number of units budgeted for the period.
ANSWER: B

If the actual labor hours worked exceed the standard labor hours allowed, what type of variance
will occur?
A. Favorable labor efficiency variance
B. Favorable labor rate variance
C. Unfavorable labor efficiency variance
D. Unfavorable labor rate variance
ANSWER: C

Which of the following is the most probable reason a company would experience an unfavorable
labor rate variance and a favorable labor efficiency variance?
A. The mix of workers assigned to the particular job was heavily weighted towards the use of
higher paid, experienced individuals.
B. The mix of workers assigned to the particular job was heavily unskilled workers.
C. Because of the production schedule, workers from other production areas were assigned to
assist this particular process.
D. Defective materials caused more labor to be used in order to produce a standard unit.
ANSWER: A

Which department is usually held responsible for an unfavorable materials quantity variance?
A. Marketing
B. Purchasing
C. Engineering
D. Production
ANSWER: D

A favorable material price variance coupled with an unfavorable material usage variance would
MOST likely result from:
A. Problems with processing machines
B. The purchase of low quality materials
C. Problems with labor efficiency
D. Changes in the product mix
ANSWER: B

Tower Company planned to produce 3,000 units of its single product, Titactium, during
November. The standards for one unit of Titactium specify six pounds of materials at P0.30 per
pound. Actual production in November was 3,100 units of Titactium. There was a favorable
materials price variance of P380 and an unfavorable material quantity variance of P120. Based
on these variances, one could conclude that:
A. More materials were purchased than were used
B. More materials were used than were purchased
C. The actual cost per pound for materials was less than the standard cost per pound.
D. The actual usage of materials was less than the standard allowed.
ANSWER: C

A labor efficiency variance resulting from the use of poor quality materials should be charged to:
A. the production manager
B. the purchasing agent
C. manufacturing overhead
D. the engineering department
ANSWER: B

Drake Company purchased materials on account. The entry to record the purchase of materials
having a standard cost of P1.50 per pound from a supplier at P1.60 per pound would include a:
A. Credit to Raw Materials Inventory
B. Debit to Work in Process
C. Credit to Materials Price Variance
D. Debit to Materials price Variance
ANSWER: D

Which of the following entries would correctly record the charging of direct labor costs to Work
in Process given an unfavorable labor efficiency variance and a favorable labor rate variance?
A. Debit Work in Process and Labor Efficiency Variance; Credit Labor Rate Variance and
Wages Payable.
B. Debit Work in Process; Credit Wages Payable
C. Debit Work in Process, Labor Efficiency Variance and Labor Rate Variance; Credit Wages
Payable
D. Debit Work in Process and Labor Rate Variance; Credit Labor Efficiency Variance and
Wages Payable
ANSWER: A

Under a standard cost system, the material price variances are usually the responsibility of the
A. production manager
B. purchasing manager
C. sales manager
D. engineering manager
ANSWER: C

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.
ANSWER: C

A debit balance in the direct labor efficiency variance account indicates that
A. Standard hours exceed actual hours
B. Actual hours exceed standard hours
C. Standard rate and standard hours exceed actual rate and actual hours
D. Actual rate and actual hours exceed standard rate and standard hours
ANSWER: B

Which of the following variance is most controllable by the production control supervisor?
A. Materials price variance
B. Materials usage variance
C. Variable Overhead Spending variance
D. Fixed Overhead budget variance
ANSWER: B

The budget for a given cost during a given period was P80,000. The actual cost for the period
was P72,000. Considering these facts, the plant manager has done a better than expected job in
controlling the cost if
A. The cost is variable and actual production was 90% of budgeted production.
B. The cost is variable and actual production equaled budgeted production.
C. The cost is variable and actual production was 80% of budgeted production.
D. The cost is a discretionary fixed cost and actual production equaled budgeted production.
ANSWER: B

In standard cost system, the materials price variance is obtained by multiplying the
A. Actual price by the difference between actual quantity purchased and standard quantity used.
B. Actual quantity purchased by the difference between actual price and standard price.
C. Standard price by the difference between standard between standard quantity purchased and
standard quantity used.
D. Standard quantity purchased by the difference between actual price and standard price.
ANSWER: B

An unfavorable price variance occurs because of

A. Price increases for raw materials
B. Price decreases for raw materials
C. Less-than-anticipated levels of waste in the manufacturing process
D. More-than-anticipated levels of waste in the manufacturing process
ANSWER: A

If a company follows a practice of isolating variances as soon as possible, the appropriate time
to isolate and recognize a direct materials price variance is when
A. Materials are issued
B. Materials are purchased
C. Materials are used in production
D. The purchase order originates
ANSWER: B

Which one of the following variances is most controllable by the production control supervisor?
A. Materials price variance
B. Materials usage variance
C. Variable Overhead spending variance
D. Fixed Overhead budget variance
ANSWER: B

Which of the following is least likely to cause an unfavorable materials quantity (usage)
variance?
A. Materials that do not meet specifications.
B. Machinery that has not been maintained properly.
C. Labor that possesses skills equal to those required by the standards.
D. Scheduling of substantial overtime.
ANSWER: C

A favorable materials price variance coupled with an unfavorable materials usage variance most
likely results from
A. Labor or machine efficiency problems.
B. The purchase and use of higher than standard quality materials.
C. The purchase and use of lower than standard quality materials.
D. Labor mix problems
ANSWER: C

Given that, AH= Actual hours, SH= Standard hours allowed for actual production, AR=Actual
rate, and SR=Standard rate, which formula represents the calculation of the labor efficiency
variance.
A. SR (AH-SH)
B. AR (AH-SH)
C. AH (AR-SR)
D. SH (AR-SR)
ANSWER: A

A debit balance in the direct labor efficiency variance account indicates that
A. Standard hours exceed actual hours.
B. Actual hours exceed standard hours.
C. Standard rate and standard hours exceed actual rate and actual hours.
D. Actual rate and actual hours exceed standard rate and standard hours.
ANSWER: B

An unfavorable direct labor efficiency variance could be caused by a(an)

A. Unfavorable variable Overhead spending variance.
B. Favorable variable Overhead spending variance.
C. Unfavorable fixed Overhead Volume variance.
D. Unfavorable material usage variance.
ANSWER: D

Which of the following unfavorable variances is directly affected by the relative position of a
production process on a learning curve.
A. Materials mix
B. Materials price
C. Labor rate
D. Labor efficiency
ANSWER: D

Excess direct labor wages resulting from overtime premium will be disclosed in which type of
variance?
A. Yield
B. Quantity
C. Labor Efficiency
D. Labor rate
ANSWER: D

How is labor rate variance computed?

A. The difference between standard and actual rates, times standard hours.
B. The difference between standard and actual hours, times actual rate.
C. The difference between standard and actual rates, times actual hours.
D. The difference between standard and actual hours, times the difference between standard and
actual rates.
ANSWER: C

The difference between the actual labor rate multiplied by the actual hours worked and the
standard labor rate multiplied by the standard labor hours is the
A. Total labor variance
B. Labor rate variance
C. Labor usage variance
D. Labor efficiency variance
ANSWER: A

Listed below are four names for different kinds of standards associated with a standard cost
system. Which one describes the labor cost that should be incurred under efficient operating
conditions?
A. Ideal
B. Basic
C. Maximum efficiency
D. Currently attainable
ANSWER: D

A difference between standard costs used for cost control and the budgeted costs of the same
manufacturing effort
A. Can exist because standard costs represent what cost should be, whereas budgeted costs are
expected actual costs.
B. Can exist because budgeted costs are historical costs, whereas standard costs are based on
engineering studies.
C. Can exist because budgeted costs include some slack, whereas standard costs do not.
D. Cannot exist because the amounts should be the same.
ANSWER: A

Which of the following is a purpose of standard costing?

A. Determine break even production level.
B. Control costs.
C. Eliminate the need for subjective decisions by management.
D. Allocate cost with more accuracy.
ANSWER: B

Which one 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 property used, standards can help motivate employees.
D. Unfavorable variances, material in amount, should be investigated, but large favorable
variances needs not be investigated.
ANSWER: C

Which of the following factors should not considered when deciding whether to investigate a
variance.
A. Magnitude of the variance and the cost of investigation.
B. Trend of the variances over time.
C. Likelihood that an investigation will eliminate future occurrences of the variance.
D. Whether the variance is favorable or unfavorable.
ANSWER: D

If the total materials variance (actual cost of materials used compared with the standard cost of
the standard amount of materials required) for a given operation is favorable, why must this
variance be further evaluated as to price and usage?
A. There is no need to further evaluate the total materials variance if it is favorable.
B. Generally accepted accounting principles require that all variances be analyzed in three
stages.
C. All variances must appear in the annual report to equity owners for proper disclosure.
D. To allow management to evaluate the efficiency of the purchasing and production function.
ANSWER: D

The budget for a given cost during a given period was P80,000. The actual cost for the period
was P72,000. Considering these facts, the plant manager has done a better than expected job in
controlling the cost if
A. The cost is variable and actual production was 90% of budgeted production.
B. The cost is variable and actual production equaled budgeted production.
C. The cost is variable and actual production was 80% of budgeted production.
D. The cost is a discretionary fixed cost and actual production equaled budgeted production.
ANSWER: B

1. 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.
Required: The standard direct material cost for cloth per unit of finished product is ___________
P 7.50
2. Cox Company’s direct material costs for the month of January were as follows:
Actual quantity purchased 18,000 kls.
Actual unit purchase price P3.60 per kl.
Materials price variance-Unfavorable(based on purchases) P3,600
Standard quantity allowed for actual production 16,000 kls.
Actual quantity used 15,000 kls.
Required: For January there was a favorable direct material quantity variance of ___________
P 3,400
3. 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 material quantity variance was
P1,875 Unfavorable; and the standard quantity of materials allowed for July production was
21,750 pounds.
Required: The materials price variance for July was _________________
P 3,250/3,150/2,250 FAVORABLE
4. Information of Fleming Company’s direct material costs follows:
Actual amount of direct materials used 20,000 lbs.
Actual direct material costs P40,000
Standard price of direct materials P2.10 per lb.
Direct material efficiency variance-favorable P3,000
Required: What was the company’s direct material price variance? _______________
P 2,000 FAVORABLE
5. 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 lbs.
Standard quantity allowed for actual production 1,450 lbs.
Materials purchase price variance – Favorable P240
Required: What was the actual purchase price per unit, rounded to the nearest centavo?
____________
P 3.45
6. The Fletcher Company uses standard costing. The following data are available for October:
Actual quantity of direct materials used 23,500 lbs.
Standard price of direct materials P2 per lbs.
Material quantity variance – favorable P1,000
Required: The standard quantity of material allowed for October production is ___________
24,000 lbs
7. 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 hrs.
Labor efficiency variance-unfavorable P600
Required: What are the actual hours worked? _______________
P 1,600
8. The standards for direct labor for a product are 2.50 hours at P8 per hour. Last month, 9,000
units of the product were made and the labor efficiency variance was P8,000 – Favorable.
Required: The actual number of hours worked during the past period was _____________

9. In a certain standard costing system the following results occurred last period: labor rate
variance, P1,000 Unfavorable; labor efficiency variance, P2,800 Favorable; and the actual
labor rate was P0.20 more per hour than the standard labor rate.
Required: The number of actual direct labor hours used last period was _____________

10. The Reedy Company uses a standard costing system. The following data are available for
November:
Actual direct labor hours worked 5,800 hrs.
Standard direct labor rate P9 per hour
Labor rate variance P1,160 Favorable
Required: The actual direct labor rate for November is ____________

11. For the month of April, Thorp Co.’s records disclosed the following data relating to direct
labor:
Actual cost P10,000
Rate variance P1,000 favorable
Efficiency variance P1,500 unfavorable
For the month of April, actual direct labor hours amounted to 2,000.
Required: In April, Thorp’s standard direct labor rate per hour was _________________

12. Borden Enterprises uses standard costing. For the month of April, the company reported the
following data:
- Standard direct labor rate P10 per hour
- Standard hours allowed for actual production 8,000
- Actual direct labor rate P9.50 per hour
- Labor efficiency variance P4,800 favorable
Required: The labor rate variance for April is _______________

13. Bryan Company employs a standard cost system in which direct materials inventory is
carried at standard cost. Bryan has established the following standards for the prime costs of
one unit of product:
Standard Quantity Standard Price Standard Cost
Direct materials 6 pounds P3.50/pound P21.00
 Direct labor 1.3 hrs. P11.00/hour 14.30
P35.30
During March, Bryan purchased 165,000 pounds of direct material at a total cost of P585,750.
The total factory wages for March were P400,000, 90% of which were for direct labor. Bryan
manufactured 25,000 units of product during March using 151,000 pounds of direct material
and 32,000 direct labor hours.
Required:
1. The price variance for the direct material acquired by the company during March is ______
2. The direct material quantity variance for March is _____________
3. The direct labor rate variance for March is _____________
4. The direct labor efficiency variance or March is ______________

14. A company producing a single product employs the following direct materials cost standard
for each unit of output:
3 pounds of materials @ P4/pound = P12/output unit
Data regarding the operations for the current month are as follows:
Planned production 26,000 units
Actual production 23,000 units
Actual purchases of direct materials (75,000 pounds) P297,000
Direct materials used in production 70,000 pounds
Required:
1. Materials purchase price variance _______________
2. Materials quantity variance ____________________

15. The total budgeted direct labor cost of a company for the month was set at P75,000 when
5,000 units were planned to be produced. The following cost standard, stated in terms of
direct labor hours (DLH), was used to develop the budget for direct labor cost:
1.25 DLH x P12.00/DLH = P15.00/unit produced
The actual operating results for the month were as follows:
Actual units produced 5,200
Actual direct labor hours worked 6,600
Actual direct labor cost P77,220

Required: The direct labor efficiency variance for the month would be ______________

16. The following direct labor information pertains to the manufacture of product Glu:
Time required to make one unit 2 DLH
Number of direct workers 50
Number of productive hours per week, per worker 40
Weekly wages per worker P500
Workers benefits treated as direct labor cost 20% of wages

Required: What is the standard direct labor cost per unit of product Glu? ______________

17. On May 1, ALIH Company began the manufacture of a new mechanical device known as
“Bhabha”. The company installed a standard cost system in accounting for manufacturing
costs. The standard costs for a unit of Bhabha are:
Materials: 6 lbs. at P1 per lb. P6.00
Direct labor: 1 hour at P4 per hour 4.00
Factory overhead: 75% of direct labor cost 3.00
P13.00
The following data were obtain from Bhabha’s records for May:

Actual production of Bhabha 4,000 units

Units sold of Bhabha 2,500
Sales P50,000
Purchases(26,000 pounds) P27,300
Materials price variance (applicable to May purchases) P1,300 unfavorable
Materials quantity variance 1,000 unfavorable
Direct labor rate variance 760 unfavorable
Direct labor efficiency variance 800 favorable
Factory overhead total variance 500 unfavorable
Required:
1. Standard materials allowed(in pounds) _______________
2. Actual quantity of materials used (in pounds) ______________
3. Standard hours allowed _________________
4. Actual hours worked ____________________
5. Actual direct labor rate __________________