Budget Variances, Materials 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\mathrm{.}00)$

$$12\mathrm{.}00$

Direct labor $(0\mathrm{.}5$ hr$.$ @ $$12\mathrm{.}00)$

$6\mathrm{.}00$

Total prime cost

$$18\mathrm{.}00$

During the first month of the year, the Boise plant produced $38,000$ belts. Actual leather purchased was $130,000$ strips at $$3\mathrm{.}00$ per strip. There were no beginning or ending inventories of leather. Actual direct labor was $38,000$ hours at $$15\mathrm{.}00$ per hour.

Required:

Compute the costs of leather and direct labor that should be incurred for the production of $38,000$ 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?