BUDGET VARIANCES, MATERIALS AND LABOR
Bolsa Corporation produces high-quality leather belts. The company uses a standard cost system and has set the following standards for materials and labor:
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Leather (3 strips @ $4)
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$12.00
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Direct labor (0.75 hr. @ $12)
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9.00
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Total prime cost
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$21.00
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During the year, Bolsa produced 40,000 belts. Actual leather purchased was 122,000 strips at $3.96 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 31,200 hours at $12.50 per hour.
Required:
1. Compute the costs of leather and direct labor that should be incurred for the pro- duction of 40,000 leather belts.
2. Compute the total budget variances for materials and labor.