Budget Variances, Materials and Labor Bolsa Corporation produces high-quality leather belts The comp

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Budget Variances, Materials and Labor

Bolsa 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 @ $600)$3000Direct labor (075 hr @ $900)675Total prime cost$3675

During the first month of the year, Boise plant produced 50,000 belts Actual leather purchased was 150,000 strips at $310 per strip There were no beginning or ending inventories of leather Actual direct labor was 33,000 hours at $1200 per hour

Required:

1Compute the costs of leather and direct labor that should be incurred for the production of 50,000 leather belts

Materials$_________________

Labor$______________

2Compute the total budget variances for materials and labor

Total Budget Variance

Materials$_______________Favorable

Labor$__________________Unfavorable

3Conceptual Connection: Would you consider these variances material with a need for investigation?

Yes

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