Budget Variances, Materials and Labor

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 @ $6.00)$30.00Direct labor (0.75 hr. @ $9.00)6.75Total prime cost$36.75

During the first month of the year, Boise plant produced 50,000 belts. Actual leather purchased was 150,000 strips at $3.10 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 33,000 hours at $12.00 per hour.

Required:

1.Compute the costs of leather and direct labor that should be incurred for the production of 50,000 leather belts.

Materials$_________________

Labor$______________

2.Compute the total budget variances for materials and labor.

Total Budget Variance

Materials$_______________Favorable

Labor$__________________Unfavorable

3.Conceptual Connection: Would you consider these variances material with a need for investigation?

Yes