Figure 10-3. Bortello Corporation produces high-quality leather boots.The company has a standard cost system and has set the following standards for materials and labor:
During the year Bortello produced 125 boots.Actual leather purchased was 1,700 strips,at $16 per strip.There were no beginning or ending inventories of leather.Actual direct labor was 1,500 hours at $15 per hour.
Refer to Figure 10-3.Compute the total budget variances for materials and labor,respectively.
A)$2,800 F and $7,500 F
B)$2,800 F and $7,500 U
C)$2,800 U and $7,500 U
D)$2,800 U and $7,500 F

Question

Figure 10-3. Bortello Corporation produces high-quality leather boots.The company has a standard cost system and has set the following standards for materials and labor:
 During the year Bortello produced 125 boots.Actual leather purchased was 1,700 strips,at $16 per strip.There were no beginning or ending inventories of leather.Actual direct labor was 1,500 hours at $15 per hour.
Refer to Figure 10-3.Compute the total budget variances for materials and labor,respectively.
A)$2,800 F and $7,500 F 
B)$2,800 F and $7,500 U 
C)$2,800 U and $7,500 U 
D)$2,800 U and $7,500 F

Quizplus · Accepted Answer

Total materials variance = Actual cost of materials - (Actual quantity of materials x Standard price per unit)
= ($16 x 1700) - (125 x 1400 x $0.06)
= $27,200 - $12,600
= $14,600 F

Total labor variance = Actual cost of labor - (Actual hours of labor x Standard rate per hour)
= ($15 x 1500) - (125 x 12 x $12)
= $22,500 - $18,000
= $4,500 U

Therefore, the total budget variances for materials and labor are $2,800 F and $7,500 U, respectively. The best choice is B.