Professional Documents
Culture Documents
Materials
a. Price variance
b. Quantity variance
Labor
a. Rate variance
b. Efficiency variance
Factory Overhead
1. Two variance method
a. Controllable variance
b. Volume variance
2. Three variance method
a. Spending variance
b. Idle capacity variance
c. Efficiency variance
a. Spending variance
= Pxxx
xxx
= Pxxx
AQ = Actual Quantity
AP = Actual Price
SP = Standard Price
Material price variance is caused by paying a higher or lower price than the standard price for
materials.
Material Quantity Variance
AQ x SP = Pxxx
SQ x SP = xxx
MQV
= Pxxx
AQ = Actual Quantity
SQ = Standard Quantity
SP = Standard Price
Material efficiency variance is caused by using more or less than the standard amount of materials to
produce a product.
Labor Rate Variance
AH x AR = Pxxx
AH x SP = xxx
LRV
= Pxxx
AH = Actual Hours
AR = Actual Rate
SR = Standard Rate
Labor rate variance is caused by paying a higher or lower rate of pay than the standard to produce a
product or complete a process.
Labor Efficiency Variance
AH x SP = Pxxx
SH x SP = xxx
LEV
= Pxxx
AH = Actual Hours
SH = Standard Hours
SR = Standard Rate
Labor efficiency variance is caused by using more or less than the standard amount of labor hours to
produce a product or complete a process.
Two Variance methods
Controllable Variance
AFO
BASH
CV
Pxxx
(xxx)
Pxxx
Pxxx
(xxx)
Pxxx
FOSH = SH x FOR
Volume Variance
BASH
FOSH
VV
The Golden Key Company produces three joint products: A, B, and C. Total production cost for November was
P216,000.
The units produced and unit sales prices at the split off point were:
Product
A
B
C
Units Produced
60,000
80,000
100,000
Point
6
4
4
3.
The Marco Daniel Company produces three products: W, X and Y that maybe sold at the split off point or
processed further. Additional processing costs are entirely variable and are traceable to the respective products
produced. Total joint costs incurred amounted to P50,000.
Product
W
X
Y
Units
Produced
20,000
15,000
15,000
Sales Value
At Split-off
P45,000
P75,000
P30,000
If processed further
Additional cost
Sales Value
P20,000
P60,000
P20,000
P98,000
P16,000
P62,000
Requirements:
A. Allocate joint costs and compute for the total cost using:
1. Market value at split-off point
2. Hypothetical market value method (assuming sales value at split-off point is not given)
MULTIPLE CHOICE
Lee Co. produces two joint products, Bex and Rom. Joint production costs for June 2001 were
P30,000. During June 2001, further processing costs beyond the split-off point needed to convert the
products into salable form, were P25,000 and P35,000 for 1,600 units of Bex and 800 units of Rom,
respectively. Bex sells for P50 per unit, and Rom sells for P100 per unit. Lee uses the net realizable
value method for allocating joint product costs.
1. For June 2001, the joint costs allocated to product Bex were
a. P20,000
b. P16,500
c. P13,500
d. P10,000
Life Co. manufactures products X and Y from a joint process that also yields a by-product, Z. Revenue
from sales of Z is treated as a reduction of joint costs. Additional information is as follows:
Units produced
Joint costs
Sales value at split-off
PRODUCTS
X
Y
20,000
20,000
?
?
P300,000
P150,000
Z
10,000
?
P10,000
TOTAL
50,000
P262,000
P460,000
Joint costs were allocated using the sales value at split-off method.
2. The joint costs allocated to product X were
a. P75,000
b. P100,000
c. P150,000
d. P168,000
Alpha Corp. manufactures a product that yields the by-product Yum. The only costs associated with
Yum are selling costs of P.10 for each unit sold. Alpha accounts for sales of Yums separable costs from
Yums sales, and then deducting this net amount from the major products cost of goods sold. Yums
sales were 100,000 units at P1.00 each.
3. If Alpha changes its method of accounting for Yums sales by showing the net amount as
additional sales revenue, then Alphas gross margin would
a. Increase by P90,000
b. Increase by P100,000
c. Increase by P110,000
d. Be unaffected
Bravo Company manufactures product J and K from a joint process. For product J, 4,000 units were
produced having a sales value at split-off of P15,000. If product J were processed further, the
additional costs would be P3,000 and the sales value would be P20,000. For product K, 2,000 units
were produced having a sales value at split-off of P10,000. If product K were processed further, the
additional costs would be P1,000 and the sales value would be P12,000.
4. Using the sales value at split-off method, the portion of the total joint costs allocated to
product J was P9,000. What were the total joint costs?
a. P14,400
b. P15,000
c. P18,400
d. P19,000
The Wooden Shoe Company produced three products at a joint cost of P100,000. Two of these
products were processed further. Production and sales were:
Product
Weight
Sales
Additional Processing Costs
A
300,000 lbs.
P245,000
P200,000
B
100,000 lbs.
30,000
None
C
100,000 lbs.
175,000
P100,000
5. If the net realizable value method is used, how much of the joint costs would be allocated to
Product C? Assume that B is accounted for as a joint product.
a. P38,889
b. P41,667
c. P50,000
d. P62,500
6. Assume B is a by-product whose sales value is credited to the joint processing costs. If net
realizable value is used, how much of the joint costs would be allocated to Product C?
a. P38,889
b. P43,750
c. P50,000
d. P62,500
7. If joint costs are allocated based on relative weight of the outputs, how much of the joint
costs would be allocated to Product A? (All products are joint products).
a. P43,750
b. P50,000
c. P60,000
d. P62,500
8. Delta Company produces two products from a joint processes: X and Z. Joint processing costs
for this production cycle are P8,000.
X
Z
Yard
s
1,500
2,200
Further processing
per yard
P1.00
P3.00
Final sales
Price per yard
P7.50
P11.25
If X and Z are processed further, no disposal costs will be incurred or such costs will be borne y the
buyer. Using a physical measure, what amount of joint processing cost is allocated to X and Z?
a. P2,500 and P5,500
b. P3,243 and P5,500
c. P2,500 and P4,757
d. P3,243 and P4,757
9. Referring to number 8, using sales value at split-off, what is the total cost allocated to Z?
a. P5,500
b. P12,100
c. P11,357
d. P4,757
10. Referring to number 8, if all units of product X were sold, what is the gross profit on sale of
product X if the approximated net realizable value at split-off is used for allocating joint
costs?
a. P8,450
b. P5,071
c. P6,954
d. P9,750
11. Love Co. manufactures product A and B from a joint process. Sales value at split-off was
P700,000 for 10,000 units of A and P300,000 for 15,000 units of B. Using the sales value at
split-off approach, joint costs properly allocated to A were P140,000. Total joint costs were
a. P98,000
b. P200,000
c. P233,333
d. P350,000
Ablen Corporation uses a process cost system and sells a variety of cooked meat. Four joint products
produced out of the process are as follows:
Product
Pounds Produced
Class A
1,000
Class B
9,000
Class C
400
Class D
5,100
The split-off point for these products occurs in Division B and the costs incurred up to this point are
P20,000 for direct materials, P15,000 for direct labor, and P7,000 for factory overhead.
12. What are the joint cost allocated to Class A and Class B assuming the use of physical method
for joint cost allocation.
a. P1,000 and P9,000
b. P3,000 and P24,387
c. P20,000 and P15,000
d. P2,710 and P24,387
The Sunrise Corp. produces three production L, M and N from one input. The net realizable value of L
at split-off is P100,000; M is P200,000; N is P20,000. Final sales value are P200,000, P300,000 and
P20,000 for L, M and N respectively. However, these prices are subject to erratic change. Additional
processing costs for L, M and N are P50,000, P75,000 and P 0 respectively. The numbers of units of
each product are 60,000 of L, 60,000 for M and 30,000 of N. The total costs incurred up to the splitoff are P150,000.
13. If the physical quantities method is used, what amount of joint costs should be allocated to
product L? Assume that product N is accounted for as a by-product whose income is credited
to the joint costs of production.
a. P46,875
b. P50,000
c. P62,500
d. P65,000
Disposal cost
Further
Bo
Mo
Lo
Pounds
800
1,100
1,500
Per lb at
Split off
P6.50
8.25
8.00
per lb at
processing
Final sales
split off
per lb.
price per lb
P3.00
P2.00
P7.50
4.20
3.00
10.00
4.00
3.50
10.50
If the products are process further, Tiny Co. will incur the following disposal costs upon sale: Bo,
P3.00; Mo, P2.00 and Lo, P1.00.
18. Using sales value at split-off, what amount of joint processing cost is allocated to Mo?
a. P700
b. P416
c. P725
d. P969
19. Using net realizable value at split off, what amount of joint processing cost is allocated to
Bo?
a. P706
b. P951
c. P700
d. P444
20. Using physical measurement method, what amount of joint processing cost is allocated to Mo?
a. P494
b. P679
c. P927
d. P700
Standard Costing
4. The following July information is for Kingston Company:
Standard:
Materials
3.0 feet per unit @ P4.20 per foot
Labor
2.5 hours per unit @ P7.50 per hour
Actual:
Production
2,750 units produced during the month
Material
8,700 feet used, 9,000 feet purchased @ P4.50 per foot
Labor
7,000 direct labor hours @ P7.90 per hour
What is the material price variance (calculated at point of purchase)?
a. P2,700 U
c. P2,610 F
b. P3,105 F
d. P1,890 U
5. Refer to number 1, what is the labor efficiency variance?
a. P3,480 U
c. P2,800 F
b. P938 U
d. P1,125 U
3. The following March information is available for Batt Manufacturing Company when it produced
2,100 units:
Standard: Materials
2 pounds per unit @ P5.80 per pound
Labor
3 direct labor hours per unit @ P10.00 per hour
Actual:
Materials
4,250 pounds purchased and used @ P5.65 per pound
Labor
6,300 direct labor hours @ P9.75 per hour
What is the material quality variance?
a. P275 F
c. P290 U
b. PP637.50 U
d. P630 F
4. Refer to number 3, what is the labor rate variance?
a. P731.25 U
c. P1,594 U
b. P1,575 F
d. P750 F
5. Information on Kennedy Companys direct material costs is as follows: Standard price 3.60;
Actual quantity purchased 1,600 units; standard quantity allowed for actual production, 1,450
units; material variance, P240 favorable. What was the actual purchase price per unit?
a. P3.06
c. P3.45
b. P3.11
d. P3.75
6. Lab Corp. uses a standard cost system. Direct labor information for product CER for the month of
October is as follows: standard rate P6.00 per hour; actual rate paid P6.10 per hour; standard
hours allowed for actual production, 1,500 hours; direct labor efficiency variance P600
unfavorable. What are the actual hours worked?
a. 1,400
c. 1,598
b. 1,402
d. 1,600
7. Redd Co. uses a standard cost system for its production process and applies overhead based on
direct labor hours. The following information is available for August when Redd made 4,500 units:
Standard:
Actual:
2.5 hours
P1.75
3.10
21,875
38,750
10,000 hrs.
P26,250
38,000
Cost Driver
Grams handled
Units painted
Labor hours
Amt. of Activity
100,000 grams
50,000 units
4,000 hours
Center Costs
P50,000
200,000
120,000
Job 1234 contains3,000 units. It weighs 10,000 grams and uses 300 hours of labor. Prime costs incurred amounts to
P180,000.
1. The overhead costs that should be assigned to Job 1234 is
a. P14,000
b. P26,000
c. P12,000
d. P9,000
2.
Cost Driver
Amount
No. of setups
P250,000
No. of engineering hours
180,000
Machine costs
900,000
3.
Using direct labor hours to allocate overhead costs, the total cost of product Regular is
a. P1,576,000
b. P1,056,000
c. P1,312,000
d. P520,000
4.
Using ABC, the total overhead costs assigned to product Super Pro is
a. P1,576,000
b. P1,402,000
c. P890,000
d. P1,056,000
5.
6.
In manufacturing Roller blades, Super Store Companys plant used 400 direct labor hours, 500 machine hours and
20 setups. The following overhead costs were taken from the factory accounts:
Overhead Expenses
Machining center
Setup center
Volume of Activities
20,000 machine hours
100 setups
4,000 direct labor hours
The plant was using a factory wide overhead rate based on direct labor hours. A new ABC system will use machine
hours in the Machining Department and number of setups in the Setup Department as cost drivers.
P120,000
40,000
7.
The overhead costs assigned to roller blades using direct labor hours to allocate overhead cost is
a. P160,000
b. P16,000
c. P12,000
d. P120,000
8.
The controller of DDay Chemical Supply has established the following activity centers with overhead costs and
related cost drivers:
Activity Centers
Materials Handling
Machine setups
Hazardous waste
Quality Control
Others
Budgeted Overhead
Costs
P120,000
240,000
60,000
85,000
205,000
Cost Drivers
Weight of raw materials
Number of setups
Weight of hazardous
Materials
Number of inspections
Machine Hours
An order for 1,000 boxes of powdered chemicals has the following production requirements:
Raw materials (in pounds)
Machine setups
Hazardous materials (in pounds)
Inspections
Machine hours
9.
10,500
5
1,850
13
490
Assume the company allocates overhead costs on a plant wide basis using machine hours, the plant wide
overhead rate is
a. P1.45/mhr
b. P6.93/mhr
c. P2.00/mhr
d. P2.50/mhr
10. The same assumption as in number 9, the overhead cost per box of powdered chemicals is
a. P3.396
b. P3,396
c. P2.50
d. P.98
11. Using ABC, the total overhead costs charged to the 1,000 boxes of powdered chemical is
a. P120,000
b. P205,000
c. P42,335
d. P3,396
12. The same assumption as in number 11, the overhead costs per unit of powdered chemical is
a. P42,335
b. P3,396
c. P120
d. P205
e. P42.335
The Chromosome Manufacturing Company produces two products, X and Y. X is selling at P12.70 per unit while
Y is selling at P12.50 per unit.
The following data are obtained for the current period.
Product X
Product Y
Number of units
11,000
3,000
Direct material cost per unit
P3.50
P3.00
Direct labor hours
10,000
2,500
Direct labor cost per unit
P5.50
P4.00
Machine hours
2,100
2,800
Inspection hours
80
100
Purchase orders
10
30
Overhead costs
Inspection costs
Purchasing costs
Machine costs
Amount
P16,200
8,000
49,000
13. Using direct labor hours to allocate overhead costs, the gross margin of product X is
a. P17,860
b. (P17,860)
c. P32,500
d. (P32,500)
14. Using ABC, the total manufacturing costs for product Y is
a. P64,000
b. P19,000
c. P35,640
d. P92,200
15. Using ABC, the total gross margin for the period is
a. P185,700
b. P267,200
c. (P15,400)
d. (P44,360)
Amend Instrument Inc. manufactures two product: missile instruments and pressure gauges. During January, 50
range instruments and 300 pressure gauges were produced, Direct cost of P54,000 and P85,000 are incurred for
Instruments and Gauges, respectively and overhead costs of P81,000 were incurred. An analysis of overhead costs
reveals the following activities:
Activity
Material handling
Machine setups
Quality inspections
Cost Driver
Number of requisitions
Number of setups
Number of inspections
Total Cost
P30,000
P27,000
P24,000
Instruments
400
150
200
Gauges
600
300
400
Total
1,000
450
600
d.
P29,000