Question
Budget Variances, Materials and Labour Mahn Corporation produces high-quality leather belts. The company uses a standard costing system and has set the following standards for
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Budget Variances, Materials and Labour
Mahn Corporation produces high-quality leather belts. The company uses a standard costing system and has set the following standards for materials and labour:
Leather (5 strips @ $3.00) $15.00 Direct labour (0.5 hr. @ $14.00) 7.00 Total prime cost $22.00 During the first month of the year, Mahn produced 37,000 belts. Actual leather purchased was 120,000 strips at $3.10 per strip. There were no beginning or ending inventories of leather. Actual direct labour was 30,000 hours at $13.00 per hour.
Required:
1. Compute the costs of leather and direct labour that should be incurred for the production of 37,000 leather belts.
Materials $fill in the blank 1 Labour $fill in the blank 2 2. Compute the total budget variances for materials and labour.
Total Budget Variance Materials $fill in the blank 3 Labour $fill in the blank 5 3. Conceptual Connection: Would you consider these variances material with a need for investigation?
Explain.
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