PHINMA- University of Iloilo

College of Accountancy
Pre-Final Examination

Name: Score:

FIN 073- Strategic Cost Management

1. A debit balance in the labor efficiency variance indicates that
A. Standard hours exceed actual hours.
B. Actual hours exceed standard hours.
C. Standard rate exceeds actual rate.
D. Actual rate exceeds standard rate.

2. The journal entry to record the direct materials quantity variance may be recorded
A. Only when direct materials are purchased
B. Only when direct materials are issued to production
C. Either (a) or (b)
D. When inventory is taken at the end of the year.

Raw Materials Purchase 6000 units input

Costs per unit:
Actual Costs P2
Standard Costs 1.5
RM issued in production for 500 units output
Actual units issued 5,800
Standard units isuued 5,600

3. What is the journal entry to record the purchase of Raw Materials

A. Raw Materials P 9,000
MPV 3,000
Accounts Payable P12,000

B. Raw Materials P 12,000

MPV P3,000
Accounts Payable 9,000

C. Work-in-process P 11,200
MQV 400
Raw Materials P11,600

D. Work-in-process P 11,600
MQV P 400
Raw Materials 11,200

4. What is the journal entry to record the issuance of RM to production

A. Raw Materials P 9,000
MPV 3,000
Accounts Payable P12,000
 B. Raw Materials P 12,000
MPV P3,000
Accounts Payable 9,000

C. Work-in-process P 11,200
MQV 400
Raw Materials P11,600

D. Work-in-process P 11,600
MQV P 400
Raw Materials 11,200

Lam Company’s standard direct labor rates in effect for the fiscal year ending June 30 and
standard hours allowed for the output in April are:

Standard DL Rate per Hour Standard DL Hours Allowed for

Output

Engineering P 8.00 500

Carpentry 7.00 500
Masonry 5.00 500

The wage rates for each labor class increased on January 1 under the terms of a new union
contract. The actual direct labor hours (DLH) and the actual direct labor rates for April were
as follows:
Actual Rate Actual DLH
Engineering P 8.50 550
Carpentry 7.50 650
Masonry 5.40 375

5. How much is the labor yield variance?

A. P350
B. P400
C. P450
D. P500

6. How much is the labor mix variance?

A. P350
B. P400
C. P450
D. P500

Use the following information for questions 7-11.

ToolTime has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000
units, ToolTime used 3,850 hours of labor at a total cost of $46,970.

7. ToolTime’s total labor variance is

A. $770 U.
B. $800 U.
C. $1,030 F.
 D. $1,930 F.

8. ToolTime’s labor price variance is

A. $770 U.
B. $800 U.
C. $1,030 F.
D. $1,930 F.

9. ToolTime’s labor quantity variance is

A. $770 U.
B. $1,030 F.
C. $1,800 F.
D. $1,930 F.

10. The labor price variance is

A. (AH × AR) – (SH × SR).
B. (AH × AR) – (AH × SR).
C. (AH × SR) – (SH × SR).
D. (AH × SR) – (SH × AR).

11. The labor quantity variance is

A. (AH × AR) – (SH × SR).
B. (AH × AR) – (AH × SR).
C. (AH × SR) – (SH × SR).
D. (AH × SR) – (SH × AR).

Stiner Company has a materials price standard of $2.00 per pound. Five thousand pounds of
materials were purchased at $2.20 per pound. The actual quantity of materials used was
5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds.

12. Stiner Company's materials price variance is

A. $100 U.
B. $1,000 U.
C. $900 U.
D. $1,000 F.

13. Stiner Company's materials quantity variance is

A. $1,000 U.
B. $1,000 F.
C. $1,100 F.
D. $1,100 U.
14. Stiner Company's total materials variance is
A. $2,000 U.
B. $2,000 F.
C. $2,100 U.
D. $2,100 F.

For questions 15-17:

 Budgeted overhead for Harrington Company at normal capacity of 30,000 direct labor
hours is $4.50 per hour variable and $3 per hour fixed. In May, $232,500 of overhead
was incurred in working 31,500 hours when 32,000 standard hours were allowed.

15. The overhead controllable variance is

A. $3,750 favorable.
B. $1,500 favorable.
C. $7,500 favorable.
D. $7,500 unfavorable.

16. The overhead volume variance is

A. $6,000 favorable.
B. $8,250 favorable.
C. $3,750 favorable.
D. $7,500 favorable.

17. The predetermined overhead rate for Weed-B-Gone is $8, comprised of a variable
overhead rate of $5 and a fixed rate of $3. The amount of budgeted overhead costs
at normal capacity of $240,000 was divided by normal capacity of 30,000 direct
labor hours, to arrive at the predetermined overhead rate of $8. Actual overhead for
June was $15,800 variable and $9,100 fixed, and standard hours allowed for the
product produced in June was 3,000 hours. The total overhead variance is
A. $4,900 F.
B. $900 F.
C. $900 U.
D. $4,900 U.

18. The predetermined overhead rate for Weed-B-Gone is $8, comprised of a variable
overhead rate of $5 and a fixed rate of $3. The amount of budgeted overhead costs
at normal capacity of $240,000 was divided by normal capacity of 30,000 direct
labor hours, to arrive at the predetermined overhead rate of $8. Actual overhead for
June was $14,800 variable and $8,100 fixed, and 1,500 units were produced. The
direct labor standard is 2 hours per unit produced. The total overhead variance is
A. $2,900 F.
B. $1,100 F.
C. $1,100 U.
D. $2,900 U.

19. The variance resulting from obtaining an output different from the one expected on the
basis of input is the:
A. Mix variance
B. Usage variance
C. Yield variance
D. Efficiency variance

20. Misleading cost numbers are most likely the result of misallocating:
A. Direct material costs
B. Direct manufacturing labor costs
C. Indirect costs
D. All of these answers are correct
21. Which of the following statement(s) about just-in-time (JIT) inventory management is
(are) true?
I. The emphasis of JIT is on "pull" manufacturing.
II. Raw materials are purchased just in time to be used in production.
III. JIT is an inventory technique that focuses on reduction of both inventory and
related inventory costs.
A. I only.
B. Il only.
C. III only.
D. I, II, and III.

22. Which of the following is not the benefits associated with the JIT system?
A. Increase in inventory levels
B. Reduction in Wastage of Time
C. Reduction in scrap rates
D. Reduction in Overhead Costs

23. The process that determines an allowable product cost while setting market price and
allowing for an acceptable profit margin is known as
A. target costing.
B. product life cycle costing.
C. life-cycle costing.
D. kaizen costing.

24. The approaches and activities of managers in short-run and long-run planning and
control decisions that increase value for customers and lower costs of products and
services are known as:
A. value chain management
B. enterprise resource planning
C. cost management
D. customer value management

25. Productivity increases if:

A. less output is produced with more input.
B. the same output is produced with more input.
C. the same output is produced with fewer inputs.
D. laborers put in more effort.

26. Ongoing efforts to reduce costs, increase product quality, and/or improve production
process once manufacturing has begun is known as
A. target costing.
B. product life cycle costing.
C. life-cycle costing.
D. kaizen costing.

27. During which stage of the product life cycle will a company witness the highest profit?
A. development
B. maturity
C. growth
D. Decline
28. Value engineering seeks to obtain increased
A. a product life-cycle and reduced direct labor inputs.
B. planning team membership and reduced time-to-market.
C. product performance ratio and reduced substitute goods.
D. product functionality and reduced costs.

29. A danger in Process Re-engineering is that

A. non-value-added activities may be eliminated.
B. some resources may no longer be required.
C. employee morale may suffer.
D. all of the above.

30. Ohio Corporation recently implemented a just-in-time (JIT) production system along will
a series of continuous improvement programs. If the firm is now considering
adopting a total quality management (TQM) program, it would likely find that TOM
A. is consistent with both JIT and continuous improvement
B. is consistent with JIT but inconsistent with continuous improvement
C. is consistent with continuous improvement but inconsistent with JIT
D. is inconsistent with both JIT and continuous improvement.

31. Most companies base the calculation of the materials price variance on the:
A. number of units purchased.
B. number of units spoiled.
C. number of units that should have been used.
D. number of units actually used.
32. A favorable labor efficiency variance is created when:
A. actual labor hours worked exceed standard hours allowed.
B. actual hours worked are less than the standard hours allowed.
C. actual wages paid are less than amounts that should have been paid.
D. actual units produced exceed budgeted production levels.

33. Victoria, Inc., recently completed 52,000 units of a product that was expected to
consume five pounds of direct material per finished unit. The standard price of the direct
material was $9 per pound. If the firm purchased and consumed 268,000 pounds in
manufacturing (cost = $2,304,800), the direct-materials quantity variance would be figured
as:
A. $72,000F.
B. $72,000U.
C. $107,200F.
D. $107,200U.

34. Courtney purchased and consumed 50,000 gallons of direct material that was used in the
production of 11,000 finished units of product. According to engineering specifications, each
finished unit had a manufacturing standard of five gallons. If a review of Courtney's
accounting records at the end of the period disclosed a material price variance of $5,000U
and a material quantity variance of $3,000F, determine the actual price paid for a gallon of
direct material.
A. $0.50.
B. $0.60.
C. $0.70.
D. An amount other than those shown above.
35. Cohen Corporation has a favorable materials quantity variance. Which department
would likely be asked to explain the cause of this variance?
A. Engineering.
B. Purchasing.
C. Production.
D. Marketing.

36. Simms Corporation had a favorable direct-labor efficiency variance of $6,000 for the
period just ended. The actual wage rate was $0.50 more than the standard rate of $12.00.
If the company's standard hours allowed for actual production totaled 9,500, how many
hours did the firm actually work?
A. 9,000.
B. 9,020.
C. 9,980.
D. 10,000.

37. Denver Enterprises recently used 14,000 labor hours to produce 7,500 completed units.
According to manufacturing specifications, each unit is anticipated to take two hours to
complete. The company's actual payroll cost amounted to $158,200. If the standard labor
cost per hour is $11, Denver's labor efficiency variance is:
A. $11,000U.
B. $11,000F.
C. $11,300U.
D. $11,300F.

38. A standard which represents an efficient level of performance that is attainable under
expected operating conditions is called a(n)
A. ideal standard.
B. loose standard.
C. tight standard.
D. normal standard.
39. The resource utilized by a given product divided by the total amount of the resource
available is called the
A Activity driver. C. Cost object.
B. Consumption ratio. D. Sustaining activity.

Special Products recently installed an activity-based relational data base. Using the
information contained in the activity relational table, the following pool rates were
computed:
$200 per purchase order
$12 per machine hour, process A
$15 per machine hour, process B
$40 per engineering hour
Two products are produced by Special Products: A and B. Each product has an area in the
plant that is dedicated to its production. The plant has two manufacturing processes,
process A and process B. Other processes include engineering, product handling and
procurement. The product relational table for Special is as follows:
Activity Usage
Activity Driver # Name Product A Product B
1 Units 200,000 25,000
 2 Purchase orders 250 125
3 Machine hours 80,000 10,000
4 Engineering hours 1,250 1,500
40. How much overhead cost will be assigned to product A using the number of purchase
orders?
a. $50,000 c. $40,000,000
b. $25,000 d. $66,750

41. How much overhead cost will be assigned to product B using engineering hours?
a. $50,000 c. $1,000,000
b. $60,000 d. $400,500

42. How much overhead cost will be assigned to product A using process A?
a. $1,200,000 c. $960,000
b. $2,400,000 d. $120,000

43. How much overhead cost will be assigned to product B using process B?
a. $1,200,000 c. $120,000
b. $960,000 d. $150,000

44. What is the unit cost of Product A?

a. $4.71 c. $252.00
b. $3.76 d. $5.30
.
45. What is the unit cost of Product B?
a. $9.40 c. $252.00
b. $6.00 d. $6.41
46. An unfavorable labor quantity variance may be caused by
A. paying workers higher wages than expected.
B. misallocation of workers.
C. worker fatigue or carelessness.
D. higher pay rates mandated by union contracts.

47. The investigation of materials price variance usually begins in the

A. first production department.
B. purchasing department.
C. controller's office.
D. accounts payable department.

48. The investigation of a materials quantity variance usually begins in the

A. production department.
B. purchasing department.
C. sales department.
D. controller's department.

49. If the labor quantity variance is unfavorable and the cause is inefficient use of direct
labor, the responsibility rests with the
A. sales department.
B. production department.
C. budget office.
D. controller's department.
50. A company purchases 20,000 pounds of materials. The materials price variance is $3,000
favorable. What is the difference between the standard and actual price paid for the
materials?
A. $.75
B. $.15
C. $3.75
D. $0

-- END OF EXAMINATION --
“ The secret of your success is determined by your hard work and strong focus on your goal”