Materials Veriances Cinturon Corporation produces high-quelity lesther belts. The compeny's plant in Boise uses a standard costing system and has set the following standards for materials and abor Leather (3 strips $4) Direct labor (0.75 hr $12) Total prime cost During the first month of the year, the Bcise plant produced 92,000 belts. Actual l ,500 strips at $3.60 per strip. There were na beginning ar ending inventories of leather. Actual direct labor was 79,300 hours at $15.00 per hour Required: 1. Break down the total variance for materials into 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 Usage venance Total variance 2. CONCEPTIAL 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 bean discovered and that this is the reason for the favorable materials price variance. Quite pleased, the purchasing mansger supgests that the materials price standard be updsted to reflect this new, less expensive source of lesther strips. Should the plant manager updste the materials price standard as sugpested? Why or why not? $12.00 .00 $21.00 leather purchased was 273 lavorable Favorable 1 No, The suggestion of the purchasing manager premature. A favorable materials price can produce an effect on both materials usege and lebor variances 2. Yes, the purchasing manager is correct. This will improve the overall profitability of the company . 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