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 @ $4.00) $20.00 Direct labor (0.25 hr. @ $12.00) 3.00 Total prime cost $23.00 During the first month of the year, the Boise plant produced 42,000 belts. Actual leather purchased was 100,000 strips at $3.80 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 34,000 hours at $16.00 per hour. Required: 1. Compute the costs of leather and direct labor that should be incurred for the production of 42,000 leather belts. Materials $ Labor 840,000 126,000 2. Compute the total budget variances for materials and labor. Favorable Total Budget Variance Materials $ 460,000 Labor Unfavorable 3. Conceptual Connection: Would you consider these variances material with a need for investigation? Yes Feedback Check My Work 3. Examine interrelationships with materials and labor. Consider what is a significant deviation from standard.