Flexible Budgeting and the Management of Overhead and

Support Activity Costs

MULTIPLE CHOICE QUESTIONS

1. A static budget:
A. is based totally on prior year's costs.
B. is based on one anticipated activity level.
C. is based on a range of activity.
D. is preferred over a flexible budget in the evaluation of performance.
E. presents a clear measure of performance when planned activity differs from actual
activity.

Answer: B LO: 1 Type: RC

2. Flexible budgets reflect a company's anticipated costs based on variations in:

A. activity levels.
B. inflation rates.
C. managers.
D. anticipated capital acquisitions.
E. standards.

Answer: A LO: 1 Type: RC

3. A flexible budget:
A. parallels a static budget with respect to format and advantages of use.
B. is preferred over a static budget in the evaluation of performance.
C. gives management flexibility in terms of meeting budget goals.
D. can be used to compare actual and budgeted costs at various levels of activity.
E. is characterized by choices "B" and "D" above.

Answer: E LO: 1 Type: RC

4. Interstate Merchandising anticipated selling 29,000 units of a major product and paying sales
commissions of P6 per unit. Actual sales and sales commissions totaled 31,500 units and
P182,700, respectively. If the company used a static budget for performance evaluations,
Interstate would report a cost variance of:
A. P6,300U.
B. P6,300F.
C. P8,700U.
D. P8,700F.
E. some other amount not listed above.

Answer: C LO: 1 Type: A

5. Main Street Merchandising anticipated selling 24,000 units of a major product and paying
sales commissions of P5 per unit. Actual sales and sales commissions totaled 23,600 units
and P120,360, respectively. If the company used a flexible budget for performance
evaluations, Main Street would report a cost variance of:
A. P360U.
B. P360F.
C. P2,360U.
D. P2,360F.
E. some other amount not listed above.

Answer: C LO: 1 Type: A

6. Badger Bakeries anticipated making 17,000 fancy cakes during a recent

period, requiring 14,000 hours of process time. Each hour of process time
was expected to cost the firm P11. Actual activity for the period was
higher than anticipated: 18,000 cakes and 15,200 hours. If each hour of
process time actually cost Badger P12, what process-time variance would
be disclosed on a performance report that incorporated static budgets and
flexible budgets?
Static Flexible
A. P15,200U P15,200U
B. P15,200U P28,400U
C. P28,400U P15,200U
D. P28,400U P28,400U
E. None of the above

Answer: C LO: 1 Type: A

7. Lantern Corporation recently prepared a manufacturing cost budget for an output of 50,000
units, as follows:

Direct materials P100,000

Direct labor 50,000
Variable overhead 75,000
Fixed overhead 100,000

Actual units produced amounted to 60,000. Actual costs incurred were: direct materials,
P110,000; direct labor, P60,000; variable overhead, P100,000; and fixed overhead, P97,000.
If Lantern evaluated performance by the use of a flexible budget, a performance report would
reveal a total variance of:
A. P3,000 favorable.
B. P23,000 favorable.
C. P27,000 unfavorable.
D. P42,000 unfavorable.
E. none of the above amounts.

Answer: A LO: 1, 2 Type: A

 8. Zin, Inc., is planning its cash needs for an upcoming period when 85,000 machine hours are
expected to be worked. Activity may drop as low as 78,000 hours if some overdue equipment
maintenance procedures are performed; on the other hand, activity could jump to 94,000 hours
if one of Zin's major competitors likely goes bankrupt. A flexible cash budget to determine
cash needs would best be based on:
A. 78,000 hours.
B. 85,000 hours.
C. 94,000 hours.
D. 78,000 hours and 94,000 hours.
E. 78,000 hours, 85,000 hours, and 94,000 hours.

Answer: E LO: 2 Type: N

9. Young Corporation has a high probability of operating at 40,000 activity hours during the
upcoming period, and lower probabilities of operating at 30,000 hours and 50,000 hours. The
company's flexible budget revealed the following:

30,000 Hours 40,000 Hours 50,000 Hours

Variable costs P135,000 P180,000 P225,000
Fixed costs 720,000 720,000 720,000

Young's flexible-budget formula, where Y is defined as total cost and AH represents activity
hours, is:
A. Y = P4.50AH + P24AH.
B. Y = P4.50AH + P720,000.
C. Y = P22.50AH.
D. Y = P180,000 + P18AH.
E. Y = P945,000.

Answer: B LO: 2 Type: A

10. Gourmet Restaurants has the following flexible-budget formula:

Y = P13PH + P450,000 where PH is defined as process hours

Which of the following statements is (are) true?

A. Gourmet has P450,000 of fixed costs.
B. Each additional hour of process time is expected to cost Gourmet P13.
C. Y would equal the amount shown as "total cost" in the firm's flexible budget.
D. Choices "A" and "B" are true.
E. Choices "A," "B," and "C" are true.

Answer: E LO: 2 Type: N

11. Delicious Treats (DT) anticipated that 84,000 process hours would be worked during an
upcoming accounting period when, in fact, 92,000 hours were actually worked. One of the
company’s cost functions is expressed as follows:

Y = P16PH + P640,000 where PH is defined as process hours

What budgeted dollar amount would appear in DT’s static budget and flexible budget for the
preceding cost function?
Static Flexible
A. P1,984,000 P1,984,000
B. P1,984,000 P2,112,000
C. P2,112,000 P1,984,000
D. P2,112,000 P2,112,000
E. None of the above.

Answer: B LO: 2 Type: A, N

12. Which of the following mathematical expressions is found in a typical flexible-budget formula
for overhead?
A. Total activity units + budgeted fixed overhead cost per unit.
B. Budgeted variable overhead cost per unit + budgeted fixed overhead cost.
C. (Budgeted variable overhead cost per unit x total activity units) + budgeted fixed
overhead costs.
D. (Budgeted fixed overhead cost per unit x total activity units) + (budgeted variable
overhead cost per unit x total activity units).
E. None of the above.

Answer: C LO: 2 Type: RC

13. A flexible budget for 15,000 hours revealed variable manufacturing overhead of P90,000 and
fixed manufacturing overhead of P120,000. The budget for 25,000 hours would reveal total
overhead costs of:
A. P210,000.
B. P270,000.
C. P290,000.
D. P350,000.
E. some other amount.

Answer: B LO: 2 Type: A

14. A flexible budget is appropriate for a(n):

Direct Labor Marketing Administrative
Budget Budget Expense Budget
A. No No No
B. No Yes Yes
C. Yes No Yes
D. Yes Yes Yes
E. No No Yes
Answer: D LO: 2 Type: N
15. A flexible budget is appropriate for a:

Sales Commission Direct Material Variable Overhead

Budget Budget Budget
A. Yes No Yes
B. Yes Yes Yes
C. No Yes No
D. No No No
E. No Yes Yes

Answer: B LO: 2 Type: N

16. The manufacturing overhead applied to Work-in-Process Inventory by a company that uses
standard costing would be computed as:
A. actual hours x a predetermined (standard) overhead rate.
B. standard hours x a predetermined (standard) overhead rate.
C. actual hours x an actual overhead rate.
D. standard hours x an actual overhead rate.
E. P0, as these firms do not apply overhead to work in process.

Answer: B LO: 3 Type: RC

17. With respect to overhead, what is the difference between normal costing and standard costing?
A. Use of a predetermined overhead rate.
B. Use of standard hours versus actual hours.
C. Use of a standard rate versus an actual rate.
D. The choice of an activity measure.
E. There is no difference.

Answer: B LO: 3 Type: RC

18. The activity measure selected for use in a variable- and fixed-overhead flexible budget:
A. should be stated in sales dollars.
B. should be approved by the company's president.
C. should vary in a similar behavior pattern to the way that variable overhead varies.
D. should remain fixed.
E. should produce the most attractive results for the individual who will use the budget in
managerial applications.

Answer: C LO: 4 Type: RC

19. Which of the following should have the strongest cause and effect relationship with overhead
costs?
A. Cost followers.
B. Non-value-added costs.
C. Cost drivers.
D. Value-added costs.
E. Units of output.
Answer: C LO: 4 Type: RC
20. Which of the following is not an overhead variance?
A. Variable-overhead spending variance.
B. Variable-overhead volume variance.
C. Variable-overhead efficiency variance.
D. Fixed-overhead budget variance.
E. Fixed-overhead volume variance.

Answer: B LO: 5 Type: RC

21. Which of the following is not an overhead variance?

A. Variable-overhead spending variance.
B. Variable-overhead efficiency variance.
C. Fixed-overhead efficiency variance.
D. Fixed-overhead budget variance.
E. Fixed-overhead volume variance.

Answer: C LO: 5 Type: RC

22. Which of the following is used in the computation of the variable-overhead

spending variance?
Actual Variable Budgeted Variable Overhead Standard Variable
Overhead Cost Based on Actual Hours Overhead Applied
A. No Yes No
B. No No No
C. Yes No Yes
D. Yes Yes No
E. Yes Yes Yes

Answer: D LO: 5 Type: RC

23. Which of the following elements are needed in a straightforward calculation of the variable-
overhead spending variance?
A. Variable overhead incurred during the period.
B. Budgeted variable overhead based on actual hours worked.
C. Standard variable overhead applied to production.
D. Elements "A" and "B" above.
E. Elements "A" and "C" above.

Answer: D LO: 5 Type: RC

24. Assume that machine hours is the cost driver for overhead. The difference between the actual
variable overhead incurred and the applied variable overhead is the:
A. volume variance.
B. net overhead variance.
C. efficiency variance.
D. sum of the spending and efficiency variances.
E. spending variance.

Answer: D LO: 5 Type: RC

25. What will cause the variable-overhead efficiency variance?

A. Efficient or inefficient use of a specific component of variable overhead (e.g., electricity).
B. Full or partial utilization of major equipment resources.
C. Production of units in excess of the number of units sold.
D. Efficient or inefficient use of the cost driver (e.g., machine hours) for variable overhead.
E. Changes in the salary cost of production supervisors.

Answer: D LO: 5 Type: N

26. Smithville uses labor hours to apply variable overhead to production. If the company's
workers were very inefficient during the period, which of the following statements would be
true about the variable-overhead efficiency variance?
A. The variance would be favorable.
B. The variance would be unfavorable.
C. The nature of the variance (favorable or unfavorable) would be unknown based on the
facts presented.
D. The variance would be the same amount as the labor efficiency variance.
E. None of the above.

Answer: B LO: 5 Type: N

27. The difference between the total actual factory overhead and the total factory overhead applied
to production is the:
A. sum of the spending, efficiency, budget, and volume variances.
B. controllable variance.
C. efficiency variance.
D. spending variance.
E. volume variance.

Answer: A LO: 5 Type: RC

28. Which of the following variances would be useful to help control overhead
spending?
Variable-Overhead Fixed-Overhead Fixed-Overhead
Spending Variance Budget Variance Volume Variance
A. Yes Yes Yes
B. Yes Yes No
C. Yes No No
D. Yes No Yes
E. No Yes No

Answer: B LO: 5 Type: N

29. The budget variance arises from a comparison of:

A. budgeted fixed overhead expenditures with budgeted fixed overhead costs.
B. actual fixed overhead costs with budgeted fixed overhead costs.
C. actual variable overhead expenditures with budgeted variable overhead costs.
D. variable overhead costs with budgeted fixed overhead costs.
E. static-budget amounts with flexible-budget amounts.

Answer: B LO: 5 Type: RC

30. Which of the following is used in the computation of the fixed overhead
budget variance?
Actual Fixed Budgeted Fixed Fixed Overhead Applied
Overhead Overhead to Production
A. Yes Yes Yes
B. Yes Yes No
C. Yes No Yes
D. Yes No No
E. No Yes Yes

Answer: B LO: 5 Type: RC

31. The difference between budgeted fixed manufacturing overhead and the fixed overhead
applied to production is the:
A. sum of the spending and efficiency variances.
B. controllable variance.
C. efficiency variance.
D. spending variance.
E. volume variance.

Answer: E LO: 5 Type: RC

32. A fixed-overhead volume variance would normally arise when:

A. actual hours of activity coincide with actual units of production.
B. budgeted fixed overhead is overapplied to production.
C. there is a fixed-overhead budget variance.
D. actual fixed overhead exceeds budgeted fixed overhead.
E. there is a variable-overhead efficiency variance.
Answer: B LO: 5 Type: RC
33. Which variance is commonly associated with measuring the cost of under- or over-utilization
of plant capacity?
A. The variable-overhead spending variance.
B. The variable-overhead efficiency variance.
C. The fixed-overhead budget variance.
D. The fixed-overhead volume variance.
E. The total fixed-overhead variance.

Answer: D LO: 5 Type: RC

34. Rowe Corporation reported the following variances for the period just ended:

Variable-overhead spending variance: P50,000U

Variable-overhead efficiency variance: P28,000U
Fixed-overhead budget variance: P70,000U
Fixed-overhead volume variance: P30,000U

If Rowe desires to analyze variances that arose primarily from managers' expenditures in
excess of anticipated amounts, the company should focus on variances that total:
A. P50,000U.
B. P70,000U.
C. P120,000U.
D. P178,000U.
E. some other amount.

Answer: C LO: 5 Type: A, N

35. Delson Company, which applies overhead to production on the basis of machine hours,
reported the following data for the period just ended:

Actual units produced: 10,000

Actual variable overhead incurred: P62,000
Actual machine hours worked: 16,000
Standard variable overhead cost per machine hour: P4

If Delson estimates 1.7 hours to manufacture a completed unit, the company's variable-
overhead spending variance is:
A. P2,000 favorable.
B. P2,000 unfavorable.
C. P6,000 favorable.
D. P6,000 unfavorable.
E. some other amount not listed above.

Answer: A LO: 5 Type: A

 36. Martin Company, which applies overhead to production on the basis of machine hours,
reported the following data for the period just ended:

Actual units produced: 9,000

Actual variable overhead incurred: P54,400
Actual machine hours worked: 16,000
Standard variable overhead cost per machine hour: P3.50

If Martin estimates two hours to manufacture a completed unit, the company's variable-
overhead efficiency variance is:
A. P1,600 favorable.
B. P1,600 unfavorable.
C. P7,000 favorable.
D. P7,000 unfavorable.
E. some other amount not listed above.

Answer: C LO: 5 Type: A

Use the following to answer questions 37-38:

Abbott has a standard variable overhead rate of P4.50 per machine hour, and each unit produced has a
standard time allowed of three hours. The company's static budget was based on 46,000 units. Actual
results for the year follow.

Actual units produced: 42,000

Actual machine hours worked: 120,000
Actual variable overhead incurred: P520,000

37. Abbott's variable-overhead spending variance is:

A. P20,000 favorable.
B. P20,000 unfavorable.
C. P27,000 favorable.
D. P27,000 unfavorable.
E. not listed above.

Answer: A LO: 5 Type: A

38. Abbott's variable-overhead efficiency variance is:

A. P20,000 favorable.
B. P20,000 unfavorable.
C. P27,000 favorable.
D. P27,000 unfavorable.
E. not listed above.

Answer: C LO: 5 Type: A

39. Arling Company, which applies overhead to production on the basis of machine hours,
reported the following data for the period just ended:

Actual units produced: 12,000

Actual fixed overhead incurred: P730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: P720,000
Planned level of machine-hour activity: 50,000

If Arling estimates four hours to manufacture a completed unit, the company's standard fixed
overhead rate per machine hour would be:
A. P12.00.
B. P14.40.
C. P14.60.
D. P15.00.
E. some other amount.

Answer: B LO: 5 Type: A

40. Herman Company, which applies overhead to production on the basis of machine hours,
reported the following data for the period just ended:

Actual units produced: 13,000

Actual fixed overhead incurred: P742,000
Standard fixed overhead rate: P15 per hour
Budgeted fixed overhead: P720,000
Planned level of machine-hour activity: 48,000

If Herman estimates four hours to manufacture a completed unit, the company's fixed-
overhead budget variance would be:
A. P22,000 favorable.
B. P22,000 unfavorable.
C. P60,000 favorable.
D. P60,000 unfavorable.
E. some other amount.

Answer: B LO: 5 Type: A

 41. Enberg Company, which applies overhead to production on the basis of machine hours,
reported the following data for the period just ended:

Actual units produced: 14,800

Actual fixed overhead incurred: P791,000
Standard fixed overhead rate: P13 per hour
Budgeted fixed overhead: P780,000
Planned level of machine-hour activity: 60,000

If Enberg estimates four hours to manufacture a completed unit, the company's fixed-overhead
volume variance would be:
A. P10,400 favorable.
B. P10,400 unfavorable.
C. P11,000 favorable.
D. P11,000 unfavorable.
E. some other amount.

Answer: B LO: 5 Type: A

Use the following to answer questions 42-43:

Benson Company, which uses a standard cost system, budgeted P600,000 of fixed overhead when
40,000 machine hours were anticipated. Other data for the period were:

Actual units produced: 10,000

Standard production time per unit: 3.9 machine hours
Fixed overhead incurred: P620,000
Actual machine hours worked: 42,000

42. Benson's fixed-overhead budget variance is:

A. P10,000 favorable.
B. P15,000 favorable.
C. P15,000 unfavorable.
D. P20,000 favorable.
E. P20,000 unfavorable.

Answer: E LO: 5 Type: A

43. Benson's fixed-overhead volume variance is:

A. P10,000 favorable.
B. P15,000 favorable.
C. P15,000 unfavorable.
D. P20,000 favorable.
E. P20,000 unfavorable.

Answer: C LO: 5 Type: A

Use the following to answer questions 44-46:

Sussex Company uses a standard cost system and prepared the following budget for May when 24,000
machine hours of activity were anticipated: variable overhead, P48,000; fixed overhead: P240,000.
Actual data for May were:

Standard machine hours allowed for output attained: 25,000

Actual machine hours worked: 24,000
Variable overhead incurred: P50,000
Fixed overhead incurred: P250,000

44. The standard variable overhead rate for May is:

A. P2.00.
B. P2.08.
C. P3.00.
D. P5.00.
E. P5.21.

Answer: A LO: 5 Type: A

45. The variable-overhead spending and efficiency variances are:

Variable-Overhead Variable-Overhead
Spending Variance Efficiency Variance
A. P0 P0
B. P0 P2,000 unfavorable
C. P2,000 unfavorable P0
D. P2,000 favorable P2,000 unfavorable
E. P2,000 unfavorable P2,000 favorable

Answer: E LO: 5 Type: A

46. The fixed-overhead budget and volume variances are:

Fixed-Overhead Fixed-Overhead
Budget Variance Volume Variance
A. P0 P10,000 favorable
B. P10,000 favorable P0
C. P10,000 favorable P10,000 unfavorable
D. P10,000 unfavorable P0
E. P10,000 unfavorable P10,000 favorable

Answer: E LO: 5 Type: A

Use the following to answer questions 47-51:

Duncanville, Inc., has the following overhead standards:

Variable overhead: 4 hours at P8 per hour

Fixed overhead: 4 hours at P10 per hour

The standards were based on a planned activity of 20,000 machine hours when 5,000 units were
scheduled for production. Actual data follow.

Variable overhead incurred: P167,750

Fixed overhead incurred: P210,000
Machine hours worked: 19,800
Actual units produced: 5,100

47. Duncanville's fixed-overhead budget variance is:

A. P6,000 unfavorable.
B. P7,000 unfavorable.
C. P10,000 unfavorable.
D. P12,000 unfavorable.
E. not listed above.

Answer: C LO: 5 Type: A

48. Duncanville's fixed-overhead volume variance is:

A. P4,000 favorable.
B. P4,000 unfavorable.
C. P10,000 favorable.
D. P10,000 unfavorable.
E. not listed above.

Answer: A LO: 5 Type: A

49. Duncanville's variable-overhead spending variance is:

A. P550 favorable.
B. P4,550 unfavorable.
C. P4,800 favorable.
D. P9,350 unfavorable.
E. not listed above.

Answer: D LO: 5 Type: A

50. Duncanville's variable-overhead efficiency variance is:

A. P550 favorable.
B. P550 unfavorable.
C. P4,800 favorable.
D. P4,800 unfavorable.
E. not listed above.
Answer: C LO: 5 Type: A
51. The amount of variable overhead that Duncanville applied to production is:
A. P158,400.
B. P160,000.
C. P163,200.
D. P167,750.
E. not listed above.

Answer: C LO: 5 Type: A

52. Luke, Inc., has a standard variable overhead rate of P5 per machine hour, with each completed
unit expected to take three machine hours to produce. A review of the company's accounting
records found the following:

Actual production: 19,500 units

Variable-overhead efficiency variance: P9,000U
Variable-overhead spending variance: P21,000F

What was Luke's actual variable overhead during the period?

A. P262,500.
B. P280,500.
C. P304,500.
D. P322,500.
E. Some other amount.

Answer: B LO: 5 Type: A, N

53. Bushnell, Inc., has a standard variable overhead rate of P4 per machine hour, with each
completed unit expected to take three machine hours to produce. A review of the company's
accounting records found the following:

Actual variable overhead: P210,000

Variable-overhead efficiency variance: P18,000U
Variable-overhead spending variance: P30,000F

How many units did Bushnell actually produce during the period?
A. 13,500.
B. 16,500.
C. 18,500.
D. 21,500.
E. Some other amount.

Answer: C LO: 5 Type: A, N

 54. Atlanta Enterprises incurred P828,000 of fixed overhead during the period. During that same
period, the company applied P845,000 of fixed overhead to production and reported an
unfavorable budget variance of P41,000. How much was Atlanta's budgeted fixed overhead?
A. P787,000.
B. P804,000.
C. P869,000.
D. P886,000.
E. Not enough information to judge.

Answer: A LO: 5 Type: A, N

Use the following to answer questions 55-56:

SanBox Company is choosing new cost drivers for its accounting system. One driver is labor hours;
the other is a combination of machine hours for unit variable costs and number of setups for a pool of
batch-level costs. Data for the past year follow.

Budget Actual
Labor hours 200,000 200,000
Machine hours 360,000 450,000
Number of setups 3,000 3,300
Unit variable cost pool P1,600,000 P2,000,000
Batch-level cost pool P900,000 P990,000

55. Assume that both cost pools are combined into a single pool, and labor
hours is the driver. The total flexible budget for the actual level of labor
hours and the total variance for the combined pool are:
Flexible Budget Variance
A. P1,600,000 P400,000U
B. P2,500,000 P490,000U
C. P2,590,000 P400,000U
D. P2,900,000 P90,000U
E. P2,990,000 P0

Answer: B LO: 7 Type: A

56. Assume that the two separate pools are used. The flexible budget
amounts for the actual level of machine hours and actual number of setups
are:
Unit Variable Batch-Level
Cost Pool Cost Pool
A. P1,600,000 P900,000
B. P1,600,000 P990,000
C. P2,000,000 P900,000
D. P2,000,000 P990,000
E. P2,500,000 P0

Answer: D LO: 7 Type: A

57. What is the most common treatment of the fixed-overhead budget variance at the end of the
accounting period?
A. Reported as a deferred charge or credit.
B. Allocated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of
Goods Sold.
C. Charged or credited to Cost of Goods Sold.
D. Allocated among Cost of Goods Manufactured, Finished-Goods Inventory, and Cost of
Goods Sold.
E. Charged or credited to Income Summary.

Answer: C LO: 8 Type: RC

58. In an effort to reduce record-keeping procedure, companies that sell perishable goods will
often enter the standard cost of direct material, direct labor, and manufacturing overhead
directly into what account?
A. Work-in-Process Inventory.
B. Finished-Goods Inventory.
C. Cost of Goods Sold.
D. Cost of Goods Manufactured.
E. Sales Revenue.

Answer: C LO: 8 Type: RC

59. When actual variable cost per unit equals standard variable cost per unit, the difference
between actual and budgeted contribution margin is explained by a combination of which two
variances?
A. The sales-volume variance and the fixed-overhead volume variance.
B. The sales-volume variance and the fixed-overhead budget variance.
C. The sales-price variance and the fixed-overhead volume variance.
D. The sales-price variance and sales-volume variance.
E. The sales-price variance and fixed-overhead budget variance.

Answer: D LO: 9 Type: RC

60. The sales-volume variance equals:

A. (actual sales volume - budgeted sales volume) x actual sales price.
B. (actual sales volume - budgeted sales volume) x actual contribution margin.
C. (actual sales volume - budgeted sales volume) x budgeted sales price.
D. (actual sales price - budgeted sales price) x budgeted sales volume.
E. (actual sales price - budgeted sales price) x fixed-overhead volume variance.

Answer: C LO: 9 Type: RC

Use the following to answer questions 61-62:

Master Products has the following information for the year just ended:

Budget Actual
Sales in units 15,000 14,000
Sales P150,000 P147,000
Less: Variable expenses 90,000 82,600
Contribution margin P 60,000 P 64,400
Less: Fixed expenses 35,000 40,000
Operating income P 25,000 P 24,400

61. The company's sales-volume variance is:

A. P3,000 unfavorable.
B. P4,000 unfavorable.
C. P4,400 favorable.
D. P10,000 unfavorable.
E. P10,000 favorable.

Answer: D LO: 9 Type: A

62. The company's sales-price variance is:

A. P3,000 unfavorable.
B. P7,000 unfavorable.
C. P7,000 favorable.
D. P7,500 unfavorable.
E. P7,500 favorable.

Answer: C LO: 9 Type: A