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 (4 strips @ $6.00)	$24.00
Direct labor (0.25 hr. @ $15.00)	3.75
Total prime cost	$27.75

During the first month of the year, the Boise plant produced 46,000 belts. Actual leather purchased was 130,000 strips at $3.30 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 30,000 hours at $16.50 per hour.

Required:

1. Compute the costs of leather and direct labor that should be incurred for the production of 46,000 leather belts.

Materials	$
Labor	$

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

	Total Budget Variance
Materials	$	Favorable
Labor	$	Unfavorable