Compute the costs of leather and direct labor that should be incurred for the production of 92,000 leather belts:

To calculate the costs of leather and direct labor that should be incurred for the production of 92,000 leather belts, we will use the standard cost per unit provided and apply it to the actual production quantity.

• Cost of Leather: Standard cost per belt for leather = $6 per belt Total standard cost for 92,000 belts = $6/belt * 92,000 belts = $552,000
• Cost of Direct Labor: Standard labor hours per belt = 0.75 hours per belt Standard cost per hour of labor = $16 per hour Total standard labor cost for 92,000 belts = (0.75 hours/belt * $16/hour) * 92,000 belts = $1,104,000

Cost of materials (leather) that should be incurred for the production of 92,000 leather belts: $552,000.

Cost of direct labor that should be incurred for the production of 92,000 leather belts: $1,104,000.

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

To calculate the budget variances for materials and labor, we will compare the actual costs to the standard costs.

• Materials Budget Variance: Actual cost of leather purchased = 287,500 strips * $5.40 per strip = $1,548,000 Budgeted cost of leather (as per standard) = $552,000

Materials Budget Variance = Actual cost – Budgeted cost Materials Budget Variance = $1,548,000 – $552,000 = $996,000 (Favorable)

• Labor Budget Variance: Actual direct labor cost = 78,200 hours * $16.50 per hour = $1,290,300 Budgeted labor cost (as per standard) = $1,104,000

Labor Budget Variance = Actual cost – Budgeted cost Labor Budget Variance = $1,290,300 – $1,104,000 = $186,300 (Unfavorable)

Total Budget Variance for Materials: $996,000 (Favorable)

Total Budget Variance for Labor: $186,300 (Unfavorable)

 Conceptual Connection: Would you consider these variances material with a need for investigation?

The favorable variance in materials of $996,000 suggests that the company spent less on leather than anticipated based on the standard cost. While this is generally a positive outcome, it does warrant investigation to ensure that the reduction in costs did not compromise the quality or quantity of leather used. It’s important to verify whether the cost reduction was due to a favorable purchase price or if there were issues with the quality or quantity of leather acquired.

The unfavorable variance in labor of $186,300 indicates that the actual labor costs exceeded the budgeted costs. This variance should be investigated to determine the reasons behind the higher labor costs. It could be due to factors such as overtime, inefficiencies in production, or changes in wage rates. Identifying the root causes of this unfavorable variance is crucial for cost control and process improvement.

In summary, both variances should be investigated to ensure that cost savings in materials do not compromise quality and to address the issues causing the unfavorable labor variance.

Refer to Exhibit 2.2 for a description of data analytic types. What data analytic type is used in Requirements?

The requirements provided in this scenario involve cost analysis and variance computation based on actual and standard data. These calculations are primarily associated with “Descriptive Analytics.” Descriptive analytics focuses on summarizing historical data to provide insights into what has happened in the past. In this case, we are analyzing actual costs and comparing them to the standard costs to understand the financial performance of the company for the given period.