Break down total variance for materials into price variance

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Guerin Corporation produces leather purses. The company uses a standard costing system and has set the following standards for materials and labor:

Leather (5 strips @ $7) $35 Direct labor (1.5 hrs. @ $14) 21 Total prime cost $56

During the year, Guerin produced 34,000 leather purses. Actual leather purchased was 173,500 strips at $6.82 per strip. There were no beginning or ending inventories of leather. Actual direct labor was 50,900 hours at $13.50 per hour.

Required

1. Compute the costs of leather and direct labor that should have been incurred for the production of 34,000 leather purses.

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

3. Break down the total variance for materials into a price variance and a usage variance.

4. Break down the total variance for labor into a rate variance and an efficiency variance.

Reference no: EM13949163

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