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 (5 strips @ $3.00)	$15.00
Direct labor (1 hr. @ $14.00)	14.00
Total prime cost	$29.00

During the first month of the year, the Boise plant produced 39,000 belts. Actual leather purchased was 110,000 strips at $3.90 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 38,000 hours at $16.00 per hour.

Required:

1. Compute the costs of leather and direct labor that should be incurred for the production of 39,000 leather belts.

Materials	$_______
Labor	$_______

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

	Total Budget Variance
Materials	$_______	Favorable
Labor	$_______	Unfavorable