Question
Bolsa Corporation produces high-quality leather belts. The company's plant in Boise uses a standard costing system and has set the following standards for materials and
Bolsa Corporation produces high-quality leather belts. The company's plant in Boise uses a standard costing system and has set the following standards for materials and labor: Leather (5 strips @ $2.00) $10.00 Direct labor (0.5 hr. @ $14.00) 7.00 Total prime cost $17.00 During the first month of the year, Boise plant produced 47,000 belts. Actual leather purchased was 140,000 strips at $3.30 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 36,000 hours at $12.00 per hour. Required: 1. Compute the costs of leather and direct labor that should be incurred for the production of 47,000 leather belts. Materials $ 470,000 Labor $ 329,000 2. Compute the total budget variances for materials and labor. Total Budget Variance Materials $ 61,100 Unfavorable Labor $ 72,000 Favorable 3. Conceptual Connection: Would you consider these variances material with a need for investigation? Yes
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