Answered: Cinturon Corporation produces…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Budget Variances, Materials and Labor

Cinturon 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 (3 strips @ $6.00)	$18.00
Direct labor (0.75 hr. @ $12.00)	9.00
Total prime cost	$27.00

During the first month of the year, the Boise plant produced 32,000 belts. Actual leather purchased was 130,000 strips at $3.70 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 30,000 hours at $12.00 per hour.

Required:

1. Compute the costs of leather and direct labor that should be incurred for the production of 32,000 leather belts.

Materials	$fill in the blank 1
Labor	$fill in the blank 2

2. Compute the total budget variances for materials and labor.

	Total Budget Variance
Materials	$fill in the blank 3	Favorable
Labor	$fill in the blank 5	Unfavorable

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

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