Universidad de Manila

659-A Cecilia Muoz St, Ermita, Manila, Metro Manila

College of Accountancy and Economics

EXERCISES
1. Actual Factory Overhead P25000
Budgeted allowance based on standard hours allowed:
Fixed overhead budgeted P13000
Variable expenses (3500 SH x P3 SR) P10500 P23500

Calculate for the Controllable Variance

a. 1500 U b. 1300 U c. 1100 U d. 1400 U

Answer: Actual Factory Overhead P25000

Budgeted allowance based on standard hours allowed:
Fixed overhead budgeted P13000
Variable expenses (3500 SH x P3 SR) P10500 P23500
Total 1500 UF (A)

2. Which of the following people is most likely responsible for an unfavorable variable
overhead efficiency variance?
A. production supervisor C. supplier
B. accountant D. purchasing agent

Answer: A. production supervisor

For items 3-5:

BSA Company produces a product that has the following factory overhead standard costs
per unit. The budgeted production is at the normal capacity of 1,000 units, requiring a budgeted
time of 3,000 hours. The total fixed factory overhead at this capacity is P 35,000.

Variable FOH 3 hrs. @ 30/hr

Fixed FOH 3 hrs. @ 10/hr

During the month, the company produced 1,050 units and incurred the following actual
factory overhead costs:

Variable FOH (3250 @ P29/hr) P94250

Fixed FOH P36500
Total P130750

3. Required: Compute for the Budget Variance

A. 2000 F B. 1300 F C. 1350 UF D. 1250 UF

BUDGET VARIANCE

Actual FOH 130,750

Answer: Budget allowed on standard hours 129,500

*for variable (1,050 x 3 hours x P30)

*for fixed (P35,000 as budgeted)

Budget variance D. P 1,250 UF

4. Calculate for the Volume Variance

A. 3000 F B. 3500 F C. 2500 UF D. 3100 UF

Answer:
VOLUME VARIANCE
Budget allowed on standard hours P 129,500
Standard FOH (1,050 x 3 hours x P40) 126,000
Volume variance P 3,500 F (B)

5. COMPUTE FOR THE TOTAL FACTORY OVERHEAD VARIANCE

A. 1200 F B. 1250 F C. 1650 UF D. 2250 UF

Answer: C. 2250 UF

For items 6-9:

BSA Company produces a product that has the following factory overhead standard costs
per unit. The budgeted production is at the normal capacity of 1,000 units, requiring a budgeted
time of 3,000 hours. The total fixed factory overhead at this capacity is P 35,000.

Variable FOH 3 hours at P30 per hour

Fixed FOH 3 hours at P10 per hour

During the month, the company produced 1,050 units and incurred the following actual factory
overhead costs:
Variable FOH 3,250 hours at P29 per hour P 94,250

Fixed FOH P 36,500

Total P130,750

6. Compute for the Spending Variance

A. -1750 F B. 1850 F C. 1750 UF D. 1250 UF

Answer: BUDGET VARIANCE

Actual FOH (variable + fixed) P130,750

Budget allowed on actual hours (BAAH) P132,500

*for variable (3,250 hours x P30)

*for fixed (P35,000 as budgeted)

Budget variance A. P -1750 F

7. Efficiency Variance
A. 2500 F B. 3500 F C. 1700 UF D. 3000 UF
Answer: EFFICIENCY VARIANCE

Budget allowed on actual hours (BAAH) P132,500

Budget allowed on standard hours (BASH)P129,500

*for variable (1,050 x 3hours x P30)

*for fixed (P35,000 as budgeted)

Efficiency variance D. P 3000 UF

8. Volume Variance
A. 3000 F B. 2300 F C. 3500 UF D. 2400 UF

Answer: VOLUME VARIANCE

Budget allowed on standard hours (BASH)P129,500

Standard FOH (1,050 x 3 hours x P40) P126,000

Volume variance C. P 3,500 UF

9. TOTAL FACTORY OVERHEAD VARIANCE

A. 200 F B. 300 F C. 400 F D. 500 F

Answer: TOTAL FACTORY OVERHEAD VARIANCE D. P 500 F

10. BTS is a manufacturing company specializing in the production of automobiles.

Information from its last budget period is as follows:

Actual Production 275 units

Budgeted Production 250 units

Standard Fixed Overhead Absorption Rate P200 per unit

A. 4000 UF B. 4500 UF C. 5000 F D. (5000) F

Answer: Absorbed Fixed Overheads (275 x P200) P55,000

Budgeted Fixed Overheads (250 x P200) (P50,000)
Fixed Overhead Volume Variance C. 5,000 Favorable

11. HBOs production management estimates that the fixed overhead should be
P700,000 during the upcoming year. However, since a production manager left the
company and was not replaced for several months, actual expenses were lower than
expected, at P672,000.

Calculate the fixed overhead spending variance:

A. (P29,000) B. P28,000 C. (P28,000) D. (P28,500)

Answer: (P672,000 Actual fixed overhead - P700,000 Budgeted fixed overhead) =

P(28,000) Fixed overhead spending variance (C.)
 12. SVG Company has a variable factory overhead budget of P1,320,000 in producing
120,000 units of its product. One unit requires 2.75 labor hours to complete -- a total of
330,000 hours. Hence, the application rate for VFOH is P4 per labor hour (1,320/330).
Last month, XYZ produced 9,600 units and employed 29,000 direct labor hours. The
actual variable factory overhead is P121,800.

Compute for the variable spending variance.

A. 5800 UF B. 5600 UF C. 5550 F D. 5000 F

Answer: The VFOH Spending Variance may be computed as:

VFOH spending variance = Actual VFOH - (BR x AB)

= P121,800 - (P4.00 x 29,000 hours)

VFOH spending variance = P5,800 unfavorable (A.)

13. Calculate the variable overhead efficiency variance using the following figures:

Number of Units Produced 620

Standard Direct Labor Hours Per Unit 0.2

Actual Direct Labor Hours Used 130

Standard Variable Overhead Rate P 9.40

A) -50 UF. B. -56 UF C. -55 F D. 50 F

Answer:

Actual Units Produced 620

Standard Direct Labor Hours Per Unit 0.2

Standard Direct Labor Hours Allowed 124

Standard Hours Allowed 124

Actual Hours Used 130

Difference 6

Standard Variable Overhead Rate P9.4

Direct Labor Efficiency Variance P56.4

14. Steptech Inc. manufactures fitness monitoring products. It estimated its fixed
manufacturing overheads for the year 2013 to be P37 million. The actual fixed overhead
expenses for the year 2013 were P40 million.

Calculate Fixed Overhead Budget Variance

A. 3M UF. B. 3.5M UF C. 5M F D. 4M F
Answer: A. Fixed Overhead Budget Variance = P37 - P40 = P3 million (unfavorable)

15. Which of the following mathematical expression is used to calculate budgeted variable
overhead cost rate per output unit?

A) Budgeted output allowed per input unit Budgeted variable overhead cost rate per
input unit
B) Budgeted input allowed per output unit Budgeted variable overhead cost rate per
input unit
C) Budgeted output allowed per input unit Budgeted variable overhead cost rate per
input unit
D) Budgeted input allowed per output unit Budgeted variable overhead cost rate per
input unit

Answer: D. Budgeted input allowed per output unit * Budgeted variable overhead cost rate per
input unit

16. When variable overhead efficiency variance is favorable, it can be safely assumed that
the ________.

A) actual rate per unit of the cost-allocation base is higher than the budgeted rate
B) actual quantity of the cost-allocation base used is higher than the budgeted quantity
C) actual rate per unit of the cost-allocation base is lower than the budgeted rate
D) actual quantity of the cost-allocation base used is lower than the budgeted quantity

Answer: D) actual quantity of the cost-allocation base used is lower than the budgeted quantity

For items 17-18:

Neocomfort Corporation manufactured 3,000 chairs during June. The following variable
overhead data relates to June:

Budgeted variable overhead cost per unit P 12.00

Actual variable manufacturing overhead cost P 49,900
Flexible-budget amount for variable manufacturing overhead P 47,800
Variable manufacturing overhead efficiency variance P 720 UF

17. What is the variable overhead flexible-budget variance?

A) P2,100 favorable
B) P1,380 favorable
C) P2,100 unfavorable
D) P1,380 unfavorable

Answer: C. Variable overhead flexible - budget variance = P2,100 (U)

18. What is the variable overhead spending variance?

A) P1,380 favorable
B) P2,820 favorable
C) P2,820 unfavorable
D) P1,380 unfavorable
Answer: D. Variable overhead flexible-budget variance = P2,100 (U)
Variable overhead efficiency variance = P720 (U)

Variable overhead spending variance = P2,100 (U) P720 (U) = P1,380 (U)

Ecocomfort Corporation manufactured 1,000 coolers during October. The following variable
overhead data relates to October:

Variable overhead spending variance P1,230 Unfavorable

Variable overhead efficiency variance P175 Unfavorable
Budgeted machine hours allowed for actual output 615 machine hours
Actual cost per machine hour P27
Budgeted cost per machine hour P25

19. Calculate the actual machine hours used by Stark during October.
A. 622 hours
B. 615 hours
C. 608 hours
D. 620 hours

Answer: A.(Actual machine hours 615 budgeted machine hours) P25 = P175

Actual machine hours = 7 hours + 615 hours = 622 hours

20. Calculate the variable overhead flexible-budget variance.

A) P1,055 unfavorable
B) P1,055 favorable
C) P1,405 unfavorable
D) P1,405 favorable

Answer: C. Variable overhead flexible-budget variance = P1,230 (U) + P175 (U) = P1,405 (U)

For items 21-24:

Zitrik Corporation manufactured 100,000 buckets during February. The variable
overhead cost allocation base is P5.00 per machine-hour. The following variable overhead data
pertain to February:

Actual Budgeted

Production 90,000 units 90,000 units

Machine-hours 9,800 hours 9,000 hours
Variable overhead cost per machine-hour P5.15 P5.05

21. What is the actual variable overhead cost?

A) P463,500
B) P436,500
C) P50,470
D) P49,490
Answer: C. Actual variable overhead cost = 9,800 mh P5.15 = P50,470

22. What is the flexible-budget amount?

A) P49,490
B) P45,450
C) P46,350
D) P47,650

Answer: B. Flexible-budget amount = 9,000 mh P5.05 = P45,450

23. What is the variable overhead spending variance?

A) P80 favorable
B)P900 unfavorable
C) P980 unfavorable
D) P900 favorable

Answer: C. Variable overhead spending variance = (P5.15 P5.05) 9,800 mh = P980

unfavorable

24. What is the variable overhead efficiency variance?

A) P4,040 unfavorable
B) P4,120 favorable
C) P4,040 favorable
D) P4,120 unfavorable

Answer: A. Variable overhead efficiency variance = [9,800 9,000] P5.05 = P4,040

unfavorable

25. ) Mendel Company makes the following journal entry:

Variable Manufacturing Overhead Allocated 200,000

Variable Manufacturing Overhead Efficiency Variance 5,000
Variable Manufacturing Overhead Control 175,000
Variable Manufacturing Overhead Spending Variance 30,000

Which of the following statements is true of the given journal entry?

A) A variable manufacturing overhead cost of P175,000 is written-off.
B) An unfavorable spending variance of P30,000 is recorded.
C) A favorable efficiency variance of P5,000 is recorded.
D) A favorable flexible-budget variance of P25,000 is recorded.

Answer: D. A favorable flexible-budget variance of P25,000 is recorded.