MCO Leather Goods manufactures leather purses Each purse requires 2 pounds of di

Question

MCO Leather Goods manufactures leather purses Each purse requires 2 pounds of direct materials at a cost of $4 per pound and 0.8 direct labor hours at a rate of $16 per hour. Variable manufacturing overhead is charged at a rate of $2 per direct labor hour Fixed manufacturing overhead is $10,000 per month. The Company's policy is to end each month with direct materials inventory equal to 40% of the next month's materials requirement At the end of August the company had 3,680 pounds of direct materials in inventory The company?s production budget reports the following (1) Prepare direct materials budgets for September and October Prepare direct labor budgets for September and October Prepare factory overhead budgets for September and October answers to one decimal place.)

Explanation / Answer

Answer:

Direct material Budget For the month of september & October September October A Budgeted production(untis) 4600 6200 5800 B Material Requirements per unit(lbs) 2 2 2 C Material needed for production(lbs) 9200 12400 11600 D Budgeted ending inventory(lbs) 4960 4640 (40%*next months C) E = C+D Total Material requirements (lbs) 14160 17040 F Budgeted beginning inventory(lbs) 3680 4960 G = E-F Materials to be purchased (lbs) 10480 12080 H Direct material cost per lbs 4 4 Total budgeted direct materials 41920 48320

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