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Material Varances $21.00 Cinturon Corporation produces high-quality leather belts. The company's plant in Bolse uses a standard conting system and has set the following standards
Material Varances $21.00 Cinturon Corporation produces high-quality leather belts. The company's plant in Bolse uses a standard conting system and has set the following standards for mate material and labor Leather strips 34) $12.00 Direct labor (0.75 ne 0512) 9.00 Total prime cost During the first month of the year, the Bose plant produced 92,000 delts. Actual leather purchased was 271.500 strips at 53.60 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 80,000 hours at $13.50 per hour. Required: 1. Break down the total variance for materials into a price variance nce and a usage variance using the columnar and formuls approaches. Enter favorabile viajes as negativn numbers and unfavorable values as positive numbers, Price variance Usage variance Total variance 2. CONCEPTUAL CONNECTION Suppose the Boise plant manager investigates the materials variances and is told by the purchasing manager that a cheaper source of leather 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 retect this new, less expensive source of heather strips, should the plant manager update the materiais price standard suggested? Why or why not? 1. No. The suppestion of the purchasing manager is premature. A favorable materials price can produce an effect on both materials usage and laber variances 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 matierals are not available and so changes to the price standard should not be made
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