University of Saint Louis Tuguegarao

SCHOOL of BUSINESS ADMINISTRATION and ACCOUNTANCY

Mabini Street, Tuguegarao City, Cagayan, Philippines 3500

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Integrated Managerial Accounting (Acctg 26 & 27)

Prelims Pretest 3 2nd SEM AY 2015-2016
Name:___________________________________

Score:_______________

Instruction: Write your answers on the space provided. Use ink pens only and
all forms of ERASURES are incorrect. God bless and honesty is still the best
policy.
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1. Which of the following is a difference between a static budget and a flexible budget?
A. A flexible budget includes only variable costs; a static budget includes only fixed costs.
B. A flexible budget includes all costs, a static budget includes only fixed costs.
C. A flexible budget gives different allowances for different levels of activity, a static budget does not.
D. There is no difference between the two.
2.Which of the following statements about the selection of standards is true?
A. Ideal standards tend to extract higher performance levels since they give employees something to live up to.
B. Currently attainable standards may encourage operating inefficiencies.
C. Currently attainable standards discourage employees from achieving their full performance potential.
D. Ideal standards demand maximum efficiency which may leave workers frustrated, thus causing a decline in
performance.
3. The per-unit standard cost for variable overhead is normally based on the
A. standard quantity of an input factor used in a unit of product.
B. actual variable overhead cost incurred at the achieved level of production.
C. budgeted total cost for variable overhead divided by the number of units expected to be produced.
D. ratio of fringe benefits to the basic cost of labor.
4. Relevant Company had the following flexible budget for 2003 at 100 percent capacity of 30,000 direct labor
hours.
Direct materials
P800,000
Direct labor
600,000
Variable manufacturing overhead
360,000
Fixed manufacturing overhead
288,000
What is the total manufacturing overhead application rate if the Relevant Company has to operate at 80 percent
of the stated capacity?

5. Derby Co. uses a standard costing system in connection with the manufacture of a line of T-shirts. Each unit of
finished product contains 2 yards of direct material. However, a 20 percent direct material spoilage calculated on
input quantities occurs during the manufacturing process. The cost of the direct materials is P120 per yard.
The standard direct material cost per unit of finished product is
6. Silver Company has a standard of 15 parts of Component R costing P1.50 each. Silver purchased 14,910 units
of R for P22,145. Silver generated a P220 favorable price variance and a P3,735 favorable usage variance. If
there were no changes in the component of inventory, how many units of finished product were produced?
7. The standard usage for raw materials is 5 pounds at P40.00 per pound. Cave Company spent P131,200 in
purchasing 3,200 pounds. Cave used 3,150 pounds to produce 600 units of finished product. The material
quantity variance is
8. Ramie has a standard price of P5.50 per pound for materials. Julys results showed an unfavorable material
price variance of P44 and a favorable quantity variance of P209. If 1,066 pounds were used in production, what
was the standard quantity allowed for materials?
9. Anne had a P750 unfavorable direct labor rate variance and an P800 favorable efficiency variance. Anne paid
P7,150 for 800 hours of labor. What was the standard direct labor wage rate?
A. P8.94
C. P7.94
B. P8.00
D. P7.80
10. The flexible budget for the month of May 2002 was for 9,000 units with direct material at P15 per unit. Direct
labor was budgeted at 45 minutes per unit for a total of P81,000. Actual output for the month was 8,500 units
with P127,500 in direct material and P77,775 in direct labor expense. Direct labor hours of 6,375 were actually
worked during the month. Variance analysis of the performance for the month of May would show a(n)
A. favorable material quantity variance of P7,500
B. unfavorable direct labor efficiency variance of P1,275
C. unfavorable material quantity variance of P7,500
D. unfavorable direct labor rate variance of P1,275
11. Karla Company uses an annual cost formula for overhead of P72,000 + P1.60 for each direct labor hour worked.
For the upcoming month Karla plans to manufacture 96,000 units. Each unit requires five minutes of direct labor.
Karlas budgeted overhead for the month is
12. If actual overhead is P14,000, overhead applied is P13,400, and overhead budgeted for the standard hours
allowed is P15,600, then the overhead controllable variance is
13. Universal Company uses a standard cost system and prepared the following budget at normal capacity for
January
Direct labor hours
24,000
Variable factory OH
P48,000
Fixed factory OH
P108,000
Total factory OH per DLH
P6.50
Actual data for January were as follows:
Direct labor hours worked
22,000
Total factory OH
P147,000
Standard DLHs allowed for capacity attained
21,000
Using the two-way analysis of overhead variance, what is the controllable variance for January?
14. The Terrain Company has a standard absorption and flexible budgeting system and uses a two-way analysis of
overhead variances. Selected data for the June production activity are:
Budgeted fixed factory overhead costs
P 64,000
Actual factory overhead
230,000
Variable factory overhead rater per DLH
P
5
Standard DLH
32,000
Actual DLH
32,000

The budget (controllable) variance for June is

15. South Company has total budgeted fixed costs of P75,000, Actual production of 19,500 units resulted in a
P3,000 favorable volume variance. What normal capacity was used to determine the fixed overhead rate?
16. CTV Company has a standard fixed cost of P6 per unit. At an actual production of 8,000 units a favorable
volume variance of P12,000 resulted. What were total budgeted fixed costs?
17. The Pinatubo Company makes and sells a single product and uses standard costing. During January, the
company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units of product. The standard cost
card for one unit of product includes the following:
Variable factory overhead: 3.0 DLHs @ P4.00 per DLH.
Fixed factory overhead: 3.0 DLHs @ P3.50 per DLH
For January, the company incurred P22,000 of actual fixed overhead costs and recorded a P875 favorable
volume variance.
The budgeted fixed overhead cost for January is
Questions 18 & 19 are based on the following information.
Lucky Company sets the following standards for 2003:
Direct labor cost (2 DLH @ P4.50)
P 9.00
Manufacturing overhead (2 DLH @ P7.50)
15.00
Lucky Company plans to produce its only product equally each month. The annual budget for overhead costs are:
Fixed overhead
P150,000
Variable overhead
300,000
Normal activity in direct labor hours
60,000
In March, Lucky Company produced 2,450 units with actual direct labor hours used of 5,050. Actual overhead costs
for the month amounted to P37,245 (Fixed overhead is as budgeted.)
18. The amount of overhead volume variance for Lucky Company is
19. Using the preceding data for Lucky Company, the controllable overhead variance was
20. Arlene had an P18,000 unfavorable volume variance, a P25,000 unfavorable variable overhead spending
variance, and P2,000 total under applied overhead. The fixed overhead budget variance is
21. Franklin Glass Works production budget for the year ended November 30, 2001 was based on 200,000 units.
Each unit requires two standard hours of labor for completion. Total overhead was budgeted at P900,000 for the
year, and the fixed overhead rate was estimated to be P3.00 per unit. Both fixed and variable overhead are
assigned to the product on the basis of direct labor hours. The actual data for the year ended November 30,
2001 are presented below.
Actual production in units
198,000
Actual direct labor hours
440,000
Actual variable overhead
P 352,000
Actual fixed overhead
P 575,000
Franklins variable overhead efficiency variance for the year ended November 30, 2001 is
22. The Virgin Island Company has standard variable costs as follows:
Materials, 3 pounds at P4.00 per pound
P12.00
Labor, 2 hours P10.00 per hour
20.00
Variable overhead, P7.50 per labor hour
15.00
Total
P47.00
During September, Virgin Island produced 6,000 units, using 11,560 labor hours at a total wage of P113,870 and
incurring P88,600 in variable overhead. The variable overhead variances are:
A.
B.
C.
D.
Spending
P1,900 favorable P1,900 unfavorable P1,400 favorable P1,400 unfavorable
Efficiency
P3,300 unfavorable P3,300 favorable P1,900 favorable P1,900 favorable

23. Fixed manufacturing overhead was budgeted at P500,000 and 25,000 direct labor hours were budgeted. If the
fixed overhead volume variance was P12,000 favorable and the fixed overhead spending variance was P16,000
unfavorable, fixed manufacturing overhead applied must be
24. Mulvey Company derived the following cost relationship from a regression analysis of its monthly manufacturing
overhead cost:
C = P80,000 + P12M
Where C = monthly manufacturing overhead cost
M = machine hours
The standard error of the estimate of the regression is P6,000.
The standard time required to manufacture one six-unit case of Mulveys single product is 4 machine hours.
Mulvey applies manufacturing overhead to production on the basis of machine hours and its normal annual
production is 50,000 cases.
Mulveys estimated variable manufacturing overhead cost for a month in which scheduled production is 5,000
cases would be
25. True or False. APEC means Asia Pacific Economic Committee.
26-30Ultra Shine Company manufactures a cleaning solvent. The company employs both skilled and unskilled
workers. To produce one 55-gallon drum of solvent requires Materials A and B as well as skilled labor and unskilled
labor. The standard and actual material and labor information is presented below:
Standard:
Material A: 30.25 gallons @ $1.25 per gallon
Material B: 24.75 gallons @ $2.00 per gallon
Skilled Labor: 4 hours @ $12 per hour
Unskilled Labor: 2 hours @ $ 7 per hour
Actual:
Material A: 10,716 gallons purchased and used @ $1.50 per gallon
Material B: 17,484 gallons purchased and used @ $1.90 per gallon
Skilled labor hours: 1,950 @ $11.90 per hour
Unskilled labor hours: 1,300 @ $7.15 per hour
During the current month Ultra Shine Company manufactured 500 55-gallon drums.
Round all answers to the nearest whole dollar.
26. Refer to Ultra Shine Company. What is the total material mix variance?
27. Refer to Ultra Shine Company. What is the total material yield variance?
28. Refer to Ultra Shine Company. What is the labor rate variance?
29. Refer to Ultra Shine Company. What is the labor mix variance?
30. Refer to Ultra Shine Company. What is the labor yield variance?