Cinturon Corporation produces high-quality leather belts. The company's plant in Bole uses a standard costing system and has set the following standards for materials and labor Leather (3 strips 54) $12.00 Direct labor (0.75 h $12) 9.00 Total prima cost $21.00 During the first month of the year, the Bolse plant produced 92,000 belts. Actual leather purchased was 301,500 strips at $3,30 per strip. There were no beginning or ending inventories of leather Actual direct labor was 79,300 hours at $14.50 per hout Required: 1. Break down the total variance for materials lieto a price variance and a usage variance using the columnar and formula approaches. Enter favorable values as negative numbers and unfavorable values as positive numbers Price variance X Favorable Usage variance x Unfavorable Total variance X Favorable 2. CONCEPTUAL CONNECTION Suppose the Boise plant manager investigates the materials variances and is told by the purchasing manager that a cheaper source of feather strips had been discovered and that this is the reason for the favorable materials price variance. Quite pleased the purchasing manager suggests that the materials price standard be updated to reflect this new. less expensive source of leather trip. Should the plant manager update the materials price standard as suggested? Why or why not? 1. No. The suggestion of the purchasing manager is premature. A favorable materials price can produce an affect on both materials usage and labor variancet. 2. Yes, the purchasing manager is correct. This will improve the overall profitability of the company. 3. No. The suggestion of the purchasing manager is incorrect. The matterals went wailable and so changes to the price standard should not be made 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 54) $12.00 Direct labor(0.75 hr. $12) 9.00 Total prime cost $21.00 During the first month of the year, the Bloise plant produced 92,000 belts. Actual leather purchased was 287,500 strips at 54.20 per strip. There were no beginning or eeding inventories of leather. Actual direct labor was 80.100 hours at $14.00 per hour Required: 1. Break down the total variance for labor into a rate variance and an efficiency variance using the columnar and formula approaches, Rate variance Efficiency variance Total variance 2. CONCEPTUAL CONNECTION As part of the investigation of the unfavorable variances, the plant manager interviews the production manager. The production manager complaint strongly about the quality of the leather strips. He indicates that the strips are of lower quality than usual and that workers have to be more care to sveld a belt with tracks and more time is required. Also, even with extra care many belts have to be discarded and new ones produced to replace the rejects. This replacement work has also produced some overtime demands. What corrective action should the plant manager take? 1. Return to suppliers that provide the quality corresponding to the price standard 2. Emoloy more skilled labor at a cost lesser than the savings made by buying cheap material and improve the product quality 3.There is no need to change anything. The sales are not affected by this low quality of raw material S