No. 125 Brgy.

San Sebastian
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MS10-05: STANDARD COSTING

“The primary purpose of cost accounting is to accumulate cost information for use of various users. In today’s
business environment, cost information plays a vital role in controlling operations specifically in minimizing costs.
In order to play this role, accountants employ standard costing and variance analysis to aid management in their
decision-making process. In this handout, a thorough discussion of standard costing will be provided.”

DEFINITION OF STANDARD AND ITS IMPORTANCE IN BUSINESS OPERATIONS

In a limited sense, standard is an approved requirement that must be satisfied. In cost accounting,
the same definition applies because standards pertain to the cost required/expected to
manufacture a single unit of product. Therefore, a standard is a yardstick to which manufacturing
operations are expected to work within.

The use of standards in business operation plays a vital role in the performance of the
management function. Standards are useful in (1) planning operations, (2) decision making, (3)
motivating, and (4) controlling.

STANDARD COSTING SYSTEM AND VARIANCE ANALYSIS

To properly use standards in the performance of management function, a standard costing system
is implemented. In a standard costing system of cost incurrence, all production costs incurred by
the company are measured at standard amount.

Because costs are measured at standard rather than actual amounts, prices and activities
pertaining to direct materials, direct labor, and manufacturing overhead should be budgeted at
the beginning of the year in order to compute for the standard cost or standard rate applicable for
the period. The use of standard costing improves consistency of product cost and enables
management to obtain information about significant/material deviations (whether favorable or
unfavorable) from the standard.

DEFINITION OF SIGNIFICANT TERMS

In applying standard costing system, the knowledge of the following terms will be useful:
1. Budgeted production – the predetermined number of units to be produced during the
period.
2. Actual production – the number of units actually produced during the period
3. Actual cost – cost actually incurred during the period
4. Standard cost – expected cost of actual production
5. Budgeted cost – expected cost of budgeted production
6. Standard rate – the predetermined cost/unit determined by the company.
7. Standard quantity – the predetermined (budgeted) quantity allowed on actual production
8. Variance - any deviation from the standard whether favorable or unfavorable
9. Favorable variance – a deviation from the standard where actual cost is lower than
standard cost. It is represented by a credit balance.
10. Unfavorable variance – a deviation from the standard where actual cost is higher than
standard cost. It is represented by a debit balance.

GENERAL PROCEDURES IN STANDARD COSTING

Standard costing entails comprehensive procedures with regard to setting standards. However,
the discussion of these comprehensive procedures will be time consuming because it
necessitates industry exposure. As such, only the general procedures will be discussed in this
material particularly those relating to accounting. The general procedures in standard costing are
as follows:
1. Prepare static budget of output quantity, input quantity, and input cost
2. Compute the standard rate and standard input quantity per output,
3. Accumulate actual cost and compute standard costs, and
4. Compute for variances.

MATERIALS STANDARDS AND MATERIALS VARIANCES

In setting standards for materials, management should first identify the direct materials needed in
producing a certain product, its type, quality, and quantity. Usually, material specifications are
shown in past material requisitions, bill of materials, engineering sheet, and research and

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development report. However, instances that materials needed are not properly documented, the
use of inquiries, observation, and other methods may be necessary. After determining the type,
quality, and quantity of materials, companies must be able to determine their standard price that
will minimize the total cost of ownership.

The standards set through the procedures discussed above are compared to the actual amount
incurred by the company. Materials variance is composed of two main variances namely price
variance and quantity variance. As the term implies, materials price variance pertains to
deviations from standard cost per unit of materials while quantity variance pertains to deviations
from standard quantity allowed on production.

Traditionally, materials price variance has been recognized at the time of purchase to simplify
computation because it would not require computation of price variance every time a new
issuance is made. However, it has been criticized because it fails to highlight the relationship
between price variance and quantity variance.

LABOR STANDARDS AND LABOR VARIANCES

In setting standards for labor cost, management must be able to know the necessary activities
needed by the employee to manufacture a certain product. After identifying the activities, the time
spent by employees on each necessary activity must be recorded in order to set a realistic
standard. The determination of time spent by employees may be done through time and motion
studies, method time measurement, review of historical time sheet, and etc. After determining
necessary activities and their related time, an operations flow document is prepared and the total
cost paid to employees is estimated.

The standards set through the procedures discussed above are compared to the actual amount
incurred by the company. Labor variance is composed of two main variances namely rate
variance and efficiency variance. As the term implies, labor rate variance pertains to deviations
from standard cost per hour while efficiency variance pertains to deviations from standard hours
allowed on production.

OVERHEAD STANDARDS AND OVERHEAD VARIANCES

Overhead standards are determined depending on the nature of the costs within manufacturing
overhead. As discussed in activity based costing, manufacturing overhead is more realistic when
causality is considered. Manufacturing overhead cost pertains to all necessary production that
are not considered direct materials and direct labor. Because of its indirect nature, it is normally
applied to production on the basis of a certain cost driver (e.g. direct labor). The computation of
overhead variances is quite complicated as it involves various formula that may look complex and
difficult. In this discussion, arbitrary letters will be used to denote the formula for overhead
analysis.

MIX AND YIELD VARIANCE

Most manufacturing companies used variety of materials and employee. As such, the use of a
single material in standard costing analysis may yield to incomplete analysis. To rectify this
criticism, mix and yield variances are computed. Mix Variance is a variance resulting from the use
of a different combination of materials/labor as compared to the standard materials/labor
specifications. Yield Variance is defined as the amount of difference from the expected output
based on the expected input from the actual output.

OTHER MATTERS IN STANDARD COSTING

In standard costing, appropriateness and attainability should be considered. Appropriateness
pertains to the applicability of the standards based on internal and external factors. Attainability,
on the other hand, pertains to the probability that standards set are capable of being achieved.
Take note that under the traditional perspective, standards that are not attainable (ideal
standards) will usually lead to unfavourable variances which in time may lead to wrong decisions.
However, as business environment began to change, the use of ideal standards is suggested in
order to encourage efficiency in the business operations.

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In addition to those discussed above, standard costing also necessitates some adjustments if
prices and quantity significantly changed over time. In a traditional paradigm, standards are
usually useful for one year. However, as the business environment evolves through time, the
frequency of standards adjustment had also increased.

REFERENCE (SUGGESTED FOR FURTHER READING)

Cost Accounting by Michael R. Kinney and Cecily A. Raiborn (2021 Edition)

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MS10-05: QUIZZER IN STANDARD COSTING

Directions: Answer each of the requirements correctly. Show your computations in good form.

1. Pinocchio Corporation used the following data to evaluate their current operating system. The
company sells items for P40 each and used a budgeted selling price of P40 per unit.

Actual Budgeted
Units sold 92,000 units 90,000 units
Variable costs P1,803,200 P1,728,000
Fixed costs P 380,000 P400,000

• What is the static-budget variance of variable costs?

• What is the flexible-budget variance of variable costs?
• What is the static-budget variance of fixed costs?

2. Direct Materials and Direct Labor Variances: BARAKO Industries, which employs a standard cost
system in which direct materials inventory is carried at standard cost. BARAKO has established the
following standards for the prime costs of one unit of product.

Standard Quantity Standard Price Standard

Cost
Direct materials ? pounds P?/pound P?.00
Direct labor 1.25 hours P24.00/hr. 30.00
P?.00

The budgeted production for the year is 264,000 units with budgeted direct materials input of
1,320,000 pounds at a total cost of P9,504,000. The total budget direct labor hours is _________ and
budgeted direct labor cost is _______________.

During April, BARAKO purchased 125,000 pounds of direct materials at a total cost of P950,000.
The total factory wages for April were P728,000, 90% of which were for direct labor.

BARAKO manufactured 22,000 units of product during April using 108,000 pounds of direct materials
and 28,000 direct labor hours.

1. Compute materials variance

2. Compute labor variance

3. Manufacturing Overhead Variances: OWEN Glassware Company has the following

standards and flexible budget data:

Static Budget
Budgeted output 50,000 units
Budgeted direct labor 100,000 hours
Budgeted fixed overhead P200,000
Budgeted variable overhead P610,000
Standard Information
Standard variable overhead rate ?
Standard fixed overhead rate ?
Standard hours per unit ?
Actual results for the month are as follows:
Actual variable overhead P540, 000
Actual fixed overhead P198,000
Actual output 40,000 units
Actual direct labor 100,000 hours

Required: Compute for the following:

1. Controllable and volume variance.
2. Spending, efficiency and volume variance.
3. Variable spending, fixed spending, variable efficiency, and fixed volume variance.

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4. Manufacturing Overhead (Reconstruction): The flexible budget formula for total overhead for is
P1,440,000 + P32 per direct labor hour. The combined overhead rate is P80 per direct labor hour.
The following data have been recorded for the year 2024:

Actual total overhead for 2024 P2,320,000

Total overhead spending variance 64,000 U
Volume variance 96,000 U

Required: Using a three-variance approach, determine the number of standard hours allowed andactual
hours of direct labor hours worked.

5. All Variances (Reconstruction): Based on the following information, find the missing data:

Actual Results
Direct materials: 10,000 pounds purchased and used, costing P102,000
Production: 20,000 units
Labor cost: 4,400 hours, cost P68,640
Fixed overhead cost: P46,000
Variable overhead cost: P92,000

Variances:
Materials price variance P 2,000 U
Materials usage variance 20,000 F
Labor efficiency variance 6,400 U
Variable overhead efficiency 8,000 U
Variable overhead spending 4,000 U
Underapplied fixed overhead 6,000 U
Volume variance 8,000 U

REQUIRED: RECONSTRUCT ALL INFORMATION AS PRACTICABLE.

6. Mix and Yield Variances (Application): Mr. Klean manufactures a cleaning solvent. The company
employs both skilled and unskilled workers. Skilled workers class C are paid P12 per hour, while
unskilled workers class D are paid P7 per hour. To produce one 55-gallon drum of solvent requires 4
hours of skilled labor and 2 hours of unskilled labor.

Actual:
Skilled labor hours: 1,950 @ P11.90 per hour
Unskilled labor hours: 1,300 @ P7.15 per hour

During the current month Mr. Klean manufactured 500 55-gallon drums. (Round all answers tothe nearest
whole peso.)

1. What is the total labor rate variance?

2. What is the total labor mix variance?
3. What is the total labor yield variance?

7. Journal Entries: The MAIKO Company makes and sells a single product called a Kitt. MAIKO employs
a standard costing system. Each Kitt has a standard cost of 5 pounds of material at P12 per pound and
0.9 direct labor hours at P15 per hour. There were no inventories of any kind of June 1. During June,
the following events occurred:
➢ Purchased 17,000 pounds of material at a total cost of P190,000.
➢ Used 15,000 pounds of material to produce 2,400 Kitts.
➢ Used 1,900 hours of direct labor time at a total cost of P38,000.

1. To record the incurrence of direct labor cost and its use in production, the general ledgerwould
include what kind of entry to the Labor Rate Variance account?
a. P 9,500 credit. c. P15,200 debit.
b. P 9,500 debit. d. P 2,000 debit.

2. To record the incurrence of direct labor cost and its use in production, the general ledgerwould
include what kind of entry to the Labor Efficiency Variance account?
a. P7,500 credit. c. P5,600 credit.
b. P5,600 debit. d. P3,900 credit.
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3. Maiko Company purchased material on account. The entry to record the purchase of
materials will include a:
a. credit to Work in Process. c. credit to Accounts Payable.
b. debit to Accounts Receivable. d. credit to Raw Materials Inventory.

4. To record the purchase of direct materials, the general ledger would include what kind ofentry to
the Materials Price Variance Account?
a. P14,000 credit . c. P10,000 credit.
b. P14,000 debit. d. P10,000 debit.

5. To record the use of direct materials in production, the general ledger would include whatkind of
entry to the Materials Quantity Variance Account?
a. P46,000 debit. c. P60,000 debit.
b. P60,000 credit. d. P36,000 debit.

MULTIPLE CHOICE THEORIES

Directions: Choose the letter of the best answer.

1. Which of the following is a purpose of standard costing?

a. Determine “break-even” production level.
b. Eliminate the need for subjective decisions by management.
c. Control costs
d. Allocate cost with more accuracy.

2. What does a favorable direct labor efficiency variance indicate?

a. The average wage rate paid to direct labor employees was less than the standard rate.
b. The standard hours allowed for the units produced were greater than actual direct labor
hours used.
c. Actual total direct labor costs incurred were less than standard direct labor costs allowed
for the units produced.
d. The number of units produced was less than the number of units budgeted for the
period.

3. The Stern Company accounts for raw materials inventory at stand cost. Stern therefore probably,
a. recognizes any price variance at the time materials are purchased.
b. Prorates variances between work-in-process, finished goods and cost of goods sold.
c. Recognizes any price variance when materials enter into production.
d. Experiences unfavorable materials price variances.

4. Yakowitch, Inc. had a favorable materials price variance in June. This means that the cost of
materials:
a. used was less than the cost that should have been incurred according to standards.
b. Used was more than the cost that should have been incurred according to standards.
c. Purchased was less than the cost that should have been incurred according to standards
d. Purchased was more than the cost that should have been incurred according to
standards.

5. The most appropriate time to record any variation of actual material prices from standard is:
a. at the end, when all variations will be known
b. at the time of purchase
c. at the time of material usage
d. as needed to evaluate the performance of the purchasing manager.

6. The material price variance:

a. measures the difference in price times the actual quantity purchased.
b. Measures the difference in price times the quantity allowed for production.
c. Measures the difference in price times the actual quantity used in production.
d. Measure the difference in price times the budgeted quantity purchased.

7. When dealing with variance analysis, which of the following statements is false?
a. Variances that are material should be investigated.
b. Variances that occur consistently should be investigated.
c. Variances that arise from critical cost areas should be investigated.
d. All variances should be investigated.
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8. Which of the following is a true statement regarding standard costs?

a. All variances from standard should be reviewed.
b. Standard costs are related to responsibility accounting.
c. Significant unfavorable variances should be investigated, whereas significant favorable
variances should not.
d. Ideal standards help motivate employees to high levels of efficiency and are usually
used.

9. Under the two-variance method for analyzing factory overhead, the controllable variance is
thedifference between:
a. Budget allowance based on standard hours allowed and the factory overhead applied to
production
b. Budget allowance based on standard hours and budget based on actual hours worked.
c. Actual factory overhead and the factory overhead applied to production.
d. Actual factory overhead and the budget allowance based on standard hours allowed.

10. Under the two-variance method for analyzing factory overhead, the controllable (budget)
variance is the difference between the
a. budget allowance based on standard hours allowed and the factory overhead applied to
production.
b. budget allowance based on standard hours allowed and the budget allowance based on
actual hours worked.
c. actual factory overhead and the factory overhead applied to production.
d. actual factory overhead and the budget allowance based on standard hours allowed.

11. A difference between standard costs used for cost control and budgeted costs
a. Can exist because standard costs must be determined after the budget is completed.
b. Can exist because standard costs represent what costs should be, whereas budgeted
costs represent expected actual costs.
c. Can exist because budgeted costs are historical costs, whereas standard costs are based
on engineering studies.
d. Cannot exist because they should be the same amounts.

12. Which of the following is not a potential cause of an unfavorable materials quantity variance?
a. Quantity discounts in the purchase of standard grade materials.
b. Favorable price variance due to lower grade materials purchased.
c. Favorable labor rate variance due to inexperienced workers.
d. Incorrect standards.

13. In a standard cost system, variations in the use of materials which can be calculated by
comparing the record of materials withdrawn with the standard of consumption is called:
a. efficiency variance
b. price variance
c. quantity variance
d. volume variance

14. It represents the standard cost variance defined as the difference between actual factory
overhead incurred and budgeted factory overhead based on actual hours worked:
a. volume variance
b. spending variance
c. efficiency variance
d. quantity variance

15. A debit balance in the labor efficiency variance indicate that

a. standard hours exceed actual hours
b. actual hours exceeds standard hours
c. standard rate exceeds actual rate
d. actual rate exceeds standard rate

16. What is a normal year-end treatment of immaterial variances recognized in a cost accounting
system utilizing standards?
a. Reclassified to deferred charges until all related production is sold.
b. Allocating among cost of goods manufactured and ending work in process inventory
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c. Closed to cost of goods sold in the period in which they arose.

d. Capitalized as a cost of ending finished goods inventory.

17. An unfavorable labor efficiency variance connotes that:

a. the actual labor rate was higher than the standard labor rate.
b. the total variance must also be unfavorable.
c. actual labor hours worked exceeded standard labor hours for the production level
achieved.
d. overtime labor was used during the period.

18. Which of the following is one of the purposes of standard cost?

a. To simplify costing procedure and expedite cost reports.
b. To replace budgets and budgeting
c. To use them as a basis of product costing for external reporting purposes.
d. To eliminate having to account for underapplied or overapplied factory overhead at the
end of the accounting period.

19. Which of the following unfavorable variances would be directly affected by the position of a
production process on a learning curve?
a. Material mix
b. Material price
c. Labor rate
d. Labor efficiency

20. The difference between the actual labor rate multiplied by the actual labor hours and the
standard labor rate multiplied by the standard labor hours is the:
a. total labor variance
b. labor rate variance
c. labor usage variance
d. labor efficiency variance.

21. A standard costing system is most often used by a firm in conjunction with:
a. Management by objectives
b. Target rates of return
c. Participative Management Programs
d. Flexible Budgets

22. The purpose of identifying manufacturing variances and assigning their responsibility to a person/
department should be to:
a. Use the knowledge about the variances to promote learning and continuous
improvement in the manufacturing operations.
b. Trace the variances to finished goods so that the inventory can be properly valued at
year end.
c. Determine the proper cost of the products produced so that selling prices can be
adjusted accordingly.
d. Pinpoint fault for operating problems in the organization.

23. Variable overhead is applied on the basis of standard direct labor hours. If, for a given period,
the direct labor efficiency variance is unfavorable. The variable overhead efficiency variance will
be:
a. Favorable
b. Unfavorable
c. Zero
d. The same amount as the labor efficiency variance.

24. In setting standards, practical standards are:

a. less widely used than ideal standards
b. standards which can be attained through efforts by the average worker at a particular
task
c. generally considered no to have a better motivational impact on workers than ideal
standards
d. more frequently used with process costing than with job order costing.

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25. All of the following are advantages of using standard costing except:
a. use of management by exception.
b. Use of responsibility accounting
c. Facilitation of cash and inventory planning
d. Easy determination of materiality.

26. The diagram below depicts a factory O/H flexible budget line DB and standard O/H application line
OA. Activity is expressed in machine hours, with Point V indicating the standard hours required for
the actual output in September. Point S indicates the actual machine hours (input) and actual
costs in September.

P
Factory A
OH
B

S●

O
V C
Machine Hours

Are the following factory O/H variances favorable or unfavorable?

a. b. c. d.
Volume (Capacity) Variance Favorable Favorable Unfavorable Unfavorable
Efficiency Variance Favorable Unfavorable Favorable Unfavorable

27. When machine-hours are used as a cost-allocation base, the item MOST likely to contribute to an
unfavorable production-volume variance is (M)
a. a new competitor gaining market share.
b. a new manufacturing machine costing considerably more than expected.
c. an increase in the cost of energy.
d. strengthened demand for the product.

28. Roach Corporation is considering which capacity measure is appropriate to use as the
denominator level of activity when applying fixed factory overhead to units produced. Assume that
Roach selects direct labor hours as the cost driver and the following additional data are available
from the prior year:
Hours
Standard direct labor hours for normal capacity 200,000
Standard direct labor hours allowed for units produced in the prior year 210,000
Standard direct labor hours for the master budget capacity 220,000
Which of the following capacity measures for the denominator-level of activity would have resulted
in an unfavorable volume variance?
a. Both normal capacity and master budget capacity.
b. Neither normal capacity nor master budget capacity.
c. Normal capacity only.
d. Master budget capacity only.

29. Which of the following is the most probable reason a company would experience an unfavorable
labor rate variance and a favorable efficiency variance?
a. The mix of workers assigned to the particular job was heavily weighted toward the use of
higher-paid, experienced individuals.
b. The mix of workers assigned to the particular job was heavily weighted toward the use of
new, relatively low-paid unskilled workers.
c. Because of the production schedule, workers from other production areas were assigned
to assist in this particular process.
d. Defective materials caused more labor to be used to product a standard unit.

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30. A company would most likely have an unfavorable labor rate variance and a favorable labor
efficiency variance if
a. the mix of workers used in the production process was more experienced than the normal
mix.
b. the mix of workers used in the production process was less experienced than the normal
mix.
c. workers from another part of the plant were used due to an extra heavy production
schedule.
d. the purchasing agent acquired very high quality material that resulted in less spoilage.

MULTIPLE CHOICE PROBLEMS

Choose the letter of the correct answer:

1. Cream Company uses a standard cost system. Information for raw materials for Product Milkfor
the month of November is as follows:
Standard unit price P1.60
Actual purchase price per unit P1.55
Actual quantity purchased 2,000 units
Standard quantity allowed for actual production 1,800 units

What is the materials purchase variance?

a. P90 favorable c. P100 favorable
b. P90 unfavorable d. P100 unfavorable

2. Milano Corporation uses a standard cost system. Direct labor information for Product N forthe
month of March is as follows:
Standard unit price P6.10 per hour
Actual rate paid P6.00 per hour
Standard quantity allowed for actual production 1,500 hours
Labor efficiency variance P600 unfavorable

What is the actual hours worked?

a. 1,400 c. 1,598
b. 1,402 d. 1,600

For the next three items: The data below relate to the month of April 2021 for Motti, Inc. whichuses
a standard cost system:
Actual direct labor cost P43,400
Actual hours used 14,000
Standard hours allowed for good output 15,000
Direct labor rate variance – debit 1,400
Actual total overhead 32,000
Budgeted fixed cost 9,000
Normal activity in hours 12,000

Total application rate per standard direct-labor hour 2.25

Motti uses a two-way analysis of overhead variance (controllable and volume).

3. What was direct labor usage (efficiency) variance for April 2021?
a. P3,000 favorable c. P3,200 favorable
b. P3,000 unfavorable d. P3,200 unfavorable

4. What was budget (controllable) variance for April 2021?

a. P500 favorable c. P2,250 favorable
b. P500 unfavorable d. P2,250 unfavorable

5. What was volume variance for April 2021?

a. P500 favorable c. P2,250 favorable
b. P500 unfavorable d. P2,250 unfavorable

6. Information on Sapphire Company’s direct-material costs is as follows:

Standard unit price P3.60
Actual quantity purchased 1,600
Standard quantity allowed for actual production 1,450
Materials purchase price variance, favorable P240

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What was the actual purchase price per unit, rounded to the nearest centavo? a.
P3.06 c. P3.45
b. P3.11 d. P3.75

7. Matthew, 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 Matthew’s actual variable overhead during the period?

a. P262,500.
b. P280,500.
c. P304,500.
d. P322,500.

(For the next five items): Cruz, Inc. produces a special line of plastic toy racing cars. Cruz, Inc. produces the
cars in batches. To manufacture a batch of the cars, Cruz, Inc. must set up the machines and molds. Setup
costs are batch-level costs because they are associated with batches rather than individual units of products.
A separate Setup Department is responsible for setting up machines and molds for different styles of car.

Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to
the number of setup-hours. The following information pertains to June 2022.

Static-Budget Amounts Actual Amounts

Units produced and sold 15,000 11,250
Batch size (number of units per batch) 250 225
Setup-hours per batch 5 5.25
Variable overhead cost per setup-hour P40 P38
Total fixed setup overhead costs P14,400 P14,000

8. Calculate the efficiency variance for variable setup overhead costs.

a. P1,500 unfavorable c. P975 unfavorable
b. P525 favorable d. P1,500 favorable

9. Calculate the spending variance for variable setup overhead costs.

a. P1,500 unfavorable c. P975 unfavorable
b. P525 favorable d. P1,500 favorable

10. Calculate the flexible-budget variance for variable setup overhead costs.
a. P1,500 unfavorable c. P975 unfavorable
b. P525 favorable d. P1,500 favorable

11. Calculate the spending variance for fixed setup overhead costs.
a. P3,200 unfavorable c. P3,600 unfavorable
b. P400 unfavorable d. P400 favorable

12. Calculate the production-volume variance for fixed setup overhead costs.
a. P3,200 unfavorable c. P3,600 unfavorable
b. P400 unfavorable d. P400 favorable

13. SHELLEE, 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 SHELLEE actually produce during the period?
a. 13,500. c. 18,500.
b. 16,500. d. 21,500.

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14. Cascade Company bought 10,000 pounds of material and used 9,500. The material price variance
was P300 unfavorable and the standard price per pound is P3. The cost of materials purchased was
a. P28,200 c. P29,700
b. P28,800 d. P30,300

15. During December, 6,000 pounds of raw materials were purchased at a cost of P16 per pound. If
there was an unfavorable direct materials price variance of P6,000 for December, the standard cost
per pound must be
a. P17 b.P15 c. P16 d. P14

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