MCO Leather Goods manufactures leather purses. Each purse requires 3 pounds of d
ID: 2472603 • Letter: M
Question
MCO Leather Goods manufactures leather purses. Each purse requires 3 pounds of direct materials at a cost of $4 per pound and 0.7 direct labor hours at a rate of $12 per hour. Variable manufacturing overhead is charged at a rate of $3 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 30% of the next month’s materials requirement. At the end of August the company had 4,480 pounds of direct materials in inventory. The company’s production budget reports the following. Production Budget September October November Units to be produced 5,200 7,100 6,500 (1) Prepare direct materials budgets for September and October. Prepare direct labor budgets for September and October
Explanation / Answer
1./
DIRECT MATERIAL BUDGET FOR SEPTEMBER
TOTAL DIRECT MATERIAL TO BE PURCHASED IN SEPTEMBER
= 15600 + 6390 - 4480
= 17510 POUNDS
TOTAL COST (17510 * $4) =$70040
DIRECT MATERIAL BUDGET FOR OCTOBER
TOTAL DIRECT MATERIAL TO BE PURCHASED IN OCTOBER
= 21300 + 5850 - 6390
= 20760 POUNDS
TOTAL COST (20760 * $4) =$83040
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2./
TOTAL DIRECT LABOUR HOUR REQUIRED FOR SEPTEMBER PRODUCTION
= 5200 * 0.7
= 3640 DIRECT LABOUR HOURS
TOTAL COST = 3640 * $12
= $43680
TOTAL DIRECT LABOUR HOUR REQUIRED FOR OCTOBER PRODUCTION
= 7100 * 0.7
= 4970 DIRECT LABOUR HOURS
TOTAL COST = 4970 * $12
= $59640
BEGINNING BALANCE OF DIRECT MATERIAL SEPTEMBER 4480 TOTAL DIRECT MATERIAL REQUIRED FOR PRODUCTION (5200 * 3) 15600 ENDING DIRECT MATERIAL REQUIRED (7100 * 3) * 30% 6390Related Questions
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