Budget Variances, Materials and Labor Bolsa Corporation produces high-quality le

ID: 2480839 • Letter: B

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:

During the first month of the year, Boise plant produced 30,000 belts. Actual leather purchased was 130,000 strips at $3.00 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 35,000 hours at $13.50 per hour.

Required:

1. Compute the costs of leather and direct labor that should be incurred for the production of 30,000 leather belts.

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

Leather (4 strips @ $5.00) $20.00 Direct labor (0.25 hr. @ $11.00) 2.75 Total prime cost $22.75

Explanation / Answer

solution :

1.costs of leather and direct labor that should be incurred

Materials (30000*20)

600000

Labor (30000*2.75)

82500

2.the total budget variances for materials and labor

material (standard cost - actual cost)

600000 - (130000*3)

210000

Favourable

labour (standard cost - actual cost)

-390000

Unfavourable

82500 - (35000*13.5)