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 @ $5.00) Direct labor (0.25 hr. @ $8.00) Total prime cost $15.00 2.00 $17.00 During the first month of the year, the Boise plant produced 39,000 belts. Actual leather purchased was 130,000 strips at $3.40 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 34,000 hours at $14.50 per hour. Required: 1. Compute the costs of leather and direct labor that should be incurred for the production of 39,000 leather belts. Materials Labor 397,800 X 493,000 X 2. Compute the total budget variances for materials and labor. Total Budget Variance Materials -397,785 X Labor -492,998 X Favorable Unfavorable 3. Conceptual Connection: Would you consider these variances material with a need for investigation? Yes

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 @ $5.00) Direct labor (0.25 hr. @ $8.00) Total prime cost $15.00 2.00 $17.00 During the first month of the year, the Boise plant produced 39,000 belts. Actual leather purchased was 130,000 strips at $3.40 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 34,000 hours at $14.50 per hour. Required: 1. Compute the costs of leather and direct labor that should be incurred for the production of 39,000 leather belts. Materials Labor 397,800 X 493,000 X 2. Compute the total budget variances for materials and labor. Total Budget Variance Materials -397,785 X Labor -492,998 X Favorable Unfavorable 3. Conceptual Connection: Would you consider these variances material with a need for investigation? Yes

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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