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Cinturon Corporation produces high-quality leather belts. The company's plant in Boise uses a standard costing system and has set the foliowing standords for materials and labor: Duning the first month of the year, the Boise planyproduced 92,000 beite. Actual leather purchased was 290,500 strips at $3.60 per strip. There were ne beginning or ending inventories of leather. Actual direct labor was 79,100 hours at $14,50 per hour. Requiredi 1. Break down the total variance for materials inte a price vartance and a usage variance wting the columnar and formula approaches, Einter favorable values as negative numbers and unfavorable values as positive numbers. 2. CONCEDTUAL CONNECTION SUppose the Boice plant managee inveuigates the matenais varances and is toid by the purchasing manager that a cheaper source of leather strips had been discovered and that this is the reason for the favorable materials price variance. Quite pleased, the purchosing manager sugpests that the materials price standard be updated to reflect this new, less expensive scurce of leather strips, should the plant manager update the materials pice standard as suggested? Why or wiy not? 1. No, The suggestion of the purchasing manager is premature, A fovorable materials price can produce an effect on both materials usage and labor variances. 2. Yes, the purchasing manager is correct. This will improve the overall profitability of the company. 3. No. The suggestion of the purchasing manager is incorrect. The matierals are not avaliable and so changes to the price standard should not be made

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