1. 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 @ $6.00)	$18.00
   Direct labor (0.5 hr. @ $14.00)	7.00
   Total prime cost	$25.00

   During the first month of the year, the Boise plant produced 32,000 belts. Actual leather purchased was 130,000 strips at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 34,000 hours at $13.00 per hour.

   Required:

   1. Compute the costs of leather and direct labor that should be incurred for the production of 32,000 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