MAS – Quiz d.

It facilitates control by permitting comparisons of

Standard and Variable Costing budgeted and actual results

1. Quorum Co. Desires an ending inventory of P120,000. 7. Raven applies overhead based on direct labor hours.
It expects sales of P240,000 and has a beginning The variable overhead standard is 2 hours at P11 per
inventory of P80,000. Cost of Sales is 60% of sales. hour. During July, Raven spent P116,700 for variable
Budgeted purchases are? overhead. 8,890 labor hours were used to produce
a. P120,000 4,700 units. What is the variable overhead spending
b. P184,000 variance?
c. P144,000 a. P6,650 UF
d. P264,000 b. P18,910 UF
c. P13,300 F
2. The difference between the actual amounts and the d. P13,300 UF
flexible budget amounts for the actual output achieved
is the 8. Sigma Company has a standard fixed cost of P18 per
a. Standard cost variance unit using a normal capacity of 9,000 units. A favorable
b. Sales volume variance volume variance of P18,000 resulted. What was the
c. Production volume variance volume produced?
d. Flexible budget variance a. Cannot be determined without further information
b. P8,000
3. Baker Co. Budgets supplies as P20,000 + (P1.20 x dlh). c. P10,000
Baker has budgeted 18,000 dlh, P130,000 dl cost. The d. P9,000
flexible budget
a. P18,000 9. The starting point in preparing a comprehensive budget
b. P20,000 is
c. P150,000 a. The flexible expense budget
d. some other number b. The cash budget
c. The sales forecast
4. Madison Industries manufactures a single product d. The budgeted income statement
using standard costing. Variable production costs are
P26 and fixed production costs are P250,000. Madison 10. A difference between standard costs used for cost
uses a normal activity of 12,500 units to set its standard control and the budgeted costs of the same
costs. Madison began the year with 1,000 units in manufacturing effort can exist because
inventory, produced 1,000 units, and sold 11,500 units. a. Standard costs include some slack, whereas
The volume variance under absorption costing would budgeted costs do not
be b. Standard costs represents what costs should be,
a. P30,000 whereas budgeted costs are expected actual costs
b. P10,000 c. Budgeted costs are historical costs, whereas
c. P20,000 standard costs are based on engineering studies
d. some other number d. Budgeted costs include some slack, whereas
standard costs do not
5. Holmgren estimates its supplies purchases to be
P21,000 in August and P28,000 in September. 11. Exeter has a material standard of 1 pound per unit of
Holmgren pays 70% of its accounts in the month of output. Each pound has a standard price of P26 per
purchase with the remainder paid the following month. pound. During July, Exeter paid P66,100 for 2,750
September payments would be pounds, which they used to produce 2,350 units. What
a. P23,100 is the direct materials quantity variance?
b. P55,900 a. P1,300 F
c. P19,600 b. P1,750 UF
d. P14,700 c. P4,550 UF
d. P3,250 UF
6. Which of the following is NOT an advantage of
budgeting? 12. A company that sets a standard fixed cost based on
a. It provides a check-up device that allows practical capacity
managers to keep close tabs on their subordinates a. Will set its selling prices too low
b. It requires managers to state their objectives b. Usually overapplies its fixed costs
c. It facilitates performance evaluation by permitting c. Should expect unfavorable volume variances
comparisons of budgeted and actual results
 d. Has a higher cost per unit than a company using
normal activity to set the standard
13. Andover Inc. has projected sales to be:
February P10,000
March P9,000
April P8,000
May P10,000
June P11,000
Andover has 30% cash sales and 70% sales on
account. Accounts are collected 40% in the month
following the sale and 55% collected the second month.
Total cash receipts in May would be
a. P3,000 c. some other number
b. P8,150 d. P8,705
14. Scarlett Company ahs a direct material standard cost
of 3 gallons of input at a cost of p5 per gallon. During
July, Scarlett Company purchased and used 7,500
gallons. The direct materials quantity variance was
P750 UF and the direct materials price variance was
P3,000 F. How many units were produced?
a. 7,500 units c. 2,500 units
b. 2,450 units d. 7,350 units
15. Aster Company has the following standards regarding
their labor production costs:
Product Engineers – P200/DLH and needed 2 hours
to produce a single unit; and
Assembly workers – P120/DLH and needed 8 hours to
produce a single unit
Actual production for the current month are as follows:
1,000 units produced at a total of 1,950 hours worked by
engineers and 9,200 hours worked in product assembly.
Total direct labor costs actually accrued and paid to the
employees amounted P1,500,000. What is the direct
labor mix variance?
a. P22,400 UF
b. P22,400 F
c. P156,500 F
d. P156,500 UF
16. The cash receipts budget
a. Requires purchases or production budget
b. Requires a sales forecast
c. Is prepared after the cash disbursement budget
d. Has none of the above characteristics
17. Madison Industries manufactures a single product
using standard costing. Variable production costs are
P26 and fixed production costs are P250,000. Madison
uses a normal activity of 12,500 units to set its standard
costs. Madison began the year with 1,000 units in
inventory, produced 11,000 units, and sold 11,500
units. Ending inventory under variable costing would be
a. Cannot be determined without further information
b. P23,000
c. P13,000
d. P10,000
18. Standard costing differs from actual costing in treating
a. Direct materials and Direct labor
b. Direct materials
c. Direct materials, Direct labor and overhead
d. Overhead
19. The use of flexible (as opposed to static) budget
allowances is LEAST important for which of the
following?
a. Costs of the production department
b. Costs of the product shipping department
c. Costs of the material receiving department
d. Costs of the general accounting department
20. Aster Company has the following standards regarding
their labor production costs:
Product Engineers – P200/DLH and needed 2 hours to
produce a single unit; and
Assembly workers – P120/DLH and needed 8 hours to
produce a single unit
Actual production for the current month are as follows:
1,000 units produced at a total of 1,950 hours worked
by engineers and 9,200 hours worked in product
assembly. Total direct labor costs actually accrued and
paid to the employees amounted P1,500,000. What is
the direct labor mix variance?
a. P22,400 UF
b. P22,400 F
c. P156,500 F
d. P156,500 UF
21. The following overhead variances can be controlled by
management, except
a. Fixed overhead spending variance
b. Variable overhead spending variance
c. Fixed overhead volume variance
d. Variable overhead efficiency variance
22. Barron Company manufactures a single product.
Barron keeps inventory of raw materials at 50% of the
coming month’s budgeted production needs. Each unit
of product requires three pounds of materials. The
production budget is, in units: May 1,000; June 1,200;
July 1,300; August 1,600. Raw material purchases in
July would be
a. 2,400 pounds
b. 1,450 pounds
c. 3,900 pounds
d. Some other number
23. Equinox Company budgeted sales of 44,000 units for
January, 60,000 for February. The budgeted beginning
inventory for January 1 was 14,000 units. Equinox
 desires an ending inventory equal to one-half of the January, P140,000 in February, and P160,000 in
following month’s sales needs. Budgeted production for March. The March 31 accounts payable balance will be
January is a. P186,000 c. P48,000
a. 52,000 units c. 74,000 units b. P144,000 d. P96,000
b. 60,000 units d. 28,000 units
30. The following overhead standards set by Panda Corp.
24. Conde Inc. has projected sales to be: February based on budgeted 1,000 DLH are as follows:
P20,000; March P18,000; April P16,000; May P20,000; Variable overhead – P40/DLH;
and June P22,000. Conde has 30% cash sales and Fixed overhead – P60/DLH
70% sales on account. Accounts are collected 40% in Assume that 1,100 DLHs were actually used by Panda
the month following the sale and 60% collected the during the period, what is the idle capacity variance
second month. Accounts receivable for May 31 would (use alternative 3-way variance analysis for overhead)?
be a. P10,000 F c. P6,000 F
a. P14,000 c. P20,720 b. P6,000 UF d. P4,000 F
b. P13,300 d. P6,160

25. To prepare its cash disbursements budget, a company

uses information from
I. Its balance sheet at the end of the prior period
II. Its purchases budget
III. Its capital budget
a. I and II only
b. All of them
c. I only
d. III only

26. Garland Company uses a standard cost system. The

standard for each finished unit of product allows for 3
pounds of plastic at P0.72 per pound. During
December, Garland bought 4,500 pounds of plastic at
P0.75 per pound, and used 4,100 pounds in the
production of 1,300 finished units of product. What is
the materials purchase price variance for the month of
December?
a. P150 UF c. P123 UF
b. P135 UF d. P117 UF

27. Raven applies overhead based on DLH. The variable

overhead standard is 2 hours at P11 per hour. During
July, Raven spent P116,700 for variable overhead.
8,890 labor hours were used to produce 4,700 units.
What is the variable overhead efficiency variance?
a. P5,610 F c. P46,090 F
b. P18,910 F d. P18,910 UF

28. Budgets set at very high levels of performance (i.e. very

low costs)
a. Stimulate people to perform better than they
ordinarily would
b. Are helpful in evaluating the performance of
managers
c. Assist in planning the operations of the company
d. Can lead to low levels of performance

29. Reid Co. makes payments for purchases 10% during

the month of purchase, 60% in the following month, and
the remainder in the second month following the
purchase. Purchases are projected to be P130,000 in