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 (0.25 hr. @ $15.00)	3.75
Total prime cost	$18.75

During the first month of the year, the Boise plant produced 36,000 belts. Actual leather purchased was 120,000 strips at $3.30 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 38,000 hours at $14.00 per hour.

Required:

1. Compute the costs of leather and direct labor that should be incurred for the production of 36,000 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	FavorableUnfavorableFavorable
Labor	$fill in the blank 5	FavorableUnfavorableUnfavorable

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