Question - 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 @ $6.00)$30.00Direct labor (0.75 hr. @ $9.00)6.75Total prime cost$36.75
During the first month of the year, Boise plant produced 50,000 belts. Actual leather purchased was 150,000 strips at $3.10 per strip.
There were no beginning or ending inventories of leather. Actual direct labor was 33,000 hours at $12.00 per hour.
Required:
1. Compute the costs of leather and direct labor that should be incurred for the production of 50,000 leather belts.
2. Compute the total budget variances for materials and labor.
3. Conceptual Connection: Would you consider these variances material with a need for investigation?