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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 (2 strips @ $6.00)	$12.00
Direct labor (0.25 hr. @ $13.00)	3.25
Total prime cost	$15.25

During the first month of the year, the Boise plant produced 48,000 belts. Actual leather purchased was 110,000 strips at $3.80 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 36,000 hours at $15.00 per hour.

Required:

1. Compute the costs of leather and direct labor that should be incurred for the production of 48,000 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