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: Leather (12 strips @ $20) $240 Direct labor (10 hours @ $12) $120 Total prime cost $360 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 costs of leather and direct labor that should have been incurred for the production of 125 boots. $36,000 and $36,000 $46,500 and $37,500 $37,200 and $20,000 $30,000 and $15,000

Answer 1

D.$30,000 and $15,000.

first let us compute the cost of labour that should have been incurred

=> number of boots * standard labour hours per boot * standard labour rate per hour

=>125 boots * 10 hours * $12

=>$15,000.

now,

let us compute the cost of leather for 125 boots,

=> number of boots *leather strip per boot * rate per leather strip

=>125 boots * 12 strips * $20.

=>$30,000..

Therefore, the cost of leather and direct labour that should have been incurred for production of 125 boots =>$30,000 and $15,000.