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 @ $4.00) Direct labor (0.25 hr. $11.00) Total prime cost $12.00 2.75 $14.75 During the first month of the year, the Boise plant produced 37,000 belts. Actual leather purchased was 120,000 strips at $3.40 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 32,000 hours at $15.00 per hour. Required: 1. Compute the costs of leather and direct labor that should be incurred for the production of 37,000 leather belts. Materials Labor 444,000 101,750 2. Compute the total budget variances for materials and labor. Total Budget Variance Materials 36,000 Favorable Labor 369,000 X Unfavorable 3. Conceptual Connection: Would you consider these variances material with a need for investigation? Yes Feedback