eBook Materials Variances Cinturon Corporation produces high-quality leather bei
ID: 2594679 • Letter: E
Question
eBook Materials Variances Cinturon Corporation produces high-quality leather beits. The company's plant in Boise uses a standard costing system and has set the following Calculator standards for materials and labor: Leather (3 strips @$4) Direct labor (0.75 hr. $12) Total prime cost During the first month of the year, the Boise plant produced 92,000 belts. Actual leather purchased was 297,500 strips at $3.60 per strip. There were no beginning or ending inventories of leather- Actual direct labor was 79.00 hours at $15.00 per hour Required: 1. Break down the total variance for materials into a price variance and a usage variance using the columnar and formula approaches. If required, enter favorable values as negative numbers. $12.00 9.00 $21.00 Favorable v Unfavorable Favorable v Price variance Usage variance Total variance 2. CONCEPTUAL CONNECTION Suppose the Boise plan t manager investigates the materials vanances and is told by the purchasing manager that a of leather strips had been discovered and that this is the reason for the favorable materials price variance. Quite pleased, the manager suopests that the materais orice stondard be updated to refect this new, les sxpensive source of leother strips, Should the plant manager update the materials price standard as suggested? Why or why not? Next Check My Work Suve ard Exit·| Submit Assignment for GradingExplanation / Answer
Answer;
material Usage vaiance
=(SQ-AQ)*SP
=((92000*3)-297500)*4
=(276000-297500)*4
=86,000 U
material Price variance
=AQ (AP-SP)
=297500* (3.60-4)
=119,000 F
Total Material Variance
= material Usage vaiance+ material Price variance
=86000 U+119,000 F
=33,000 F
Or you can alternatively calculate as under
Leather Planned Cost
=12 x 92000
= $1,104,000
Leather Actual Cost
=297500 x 3.6
= $1,071,000
Total Material Variance
= Leather Planned Cost - Leather Actual Cost
=1,140,000-1,071,00
=33000 F
material Price variance
119,000 F
material Usage vaiance
86000 U
Total Material Variance
33000 F
material Price variance
119,000 F
material Usage vaiance
86000 U
Total Material Variance
33000 F
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