Budget Variances, Materia ls and Labor Cinturon 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 (3 strips @ $4) $12.00 Direct labor (0.75 hr.@ $12) 9.00 $21.00 Total prime cost During the first month of the year, the Boise plant produced 92,000 belts. Actual leather purchased was 287,500 strips at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 78,200 hours at $12.50 per hour. Required: 1. Compute the costs of leather and direct labor that should be incurred for the production of 92,000 leather belts. Cost of materials $ 1,104,000 828,000 Cost of direct labor 2. Compute the total budget variances for materials and labor. Total Budget Variance X Favorable Materials Unfavorable v Labor 3. Conceptual Connection: Would you consider these variances material with a need for investigation? Yes