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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

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 (1 hr. @ $11.00) 11.00
Total prime cost $31.00

During the first month of the year, the Boise plant produced 42,000 belts. Actual leather purchased was 140,000 strips at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 31,000 hours at $16.50 per hour.

Required:

1. Compute the costs of leather and direct labor that should be incurred for the production of 42,000 leather belts.

Materials $fill in the blank 1
Labor $fill in the blank 2

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

Total Budget Variance
Materials $fill in the blank 3

FavorableUnfavorable

Labor $fill in the blank 5

FavorableUnfavorable

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

YesNo

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