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.
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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

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.
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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

Material Variances:
MPV = (AP - SP) × AQ
($16 - $20) × 1,700 = $6,800 F
MUV = (AQ - SQ) × SP
(1,700 - 1,500) × $20 = $4,000 U
Total Material Variance = $6,800 F - $4,000 U = $2,800 F
Labor Variances:
LRV = (AR - SR) × AH
($15 - $12) × 1,500 = $4,500 U
LEV = (AH - SH) × SR
(1,500 - 1,250) × $12 = $3,000 U
Total Labor Variance = $4,500 U + $3,000 U = $7,500 U

Bortello Corporation Produces High-Quality Leather Boots