Question
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
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 @ $5.00) | $25.00 |
Direct labor (0.25 hr. @ $14.00) | 3.50 |
Total prime cost | $28.50 |
During the first month of the year, the Boise plant produced 50,000 belts. Actual leather purchased was 150,000 strips at $3.10 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 37,000 hours at $14.50 per hour.
Required:
1. Compute the costs of leather and direct labor that should be incurred for the production of 50,000 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 | |
Labor | $fill in the blank 5 |
3. Conceptual Connection: Would you consider these variances material with a need for investigation?
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