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 $17 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $20,000 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 3,680 pounds of direct materials in inventory. The company’s production budget reports the following.

Production Budget Units to be produced September 5,600 October 6,600 November 6,100 (1) Prepare direct materials budgets for September and October. (2) Prepare direct labor budgets for September and October (3) Prepare factory overhead budgets for September and October Complete this question by entering your answers in the tabs below. Required 1 | Required 2 Required 3 Prepare direct materials budgets for September and October. October MCO LEATHER GOODS Direct Materials Budget For the Months of September and October September Budgeted production (units) Materials requirements per unit (lbs.) Materials needed for production (lbs.) Budgeted ending inventory (lbs.) Total materials requirements (lbs.) Budgeted beginning inventory (lbs.) Materials to be purchased (lbs.) Direct material cost per lb. Total budgeted direct materials

Answer 1

MCO LEATHER GOODS Direct Materials Budget For the Months of September and October September October Budgeted production (units) 5,600 6,600 Materials requirements per unit (lbs.) Materials needed for production (lbs.) 16,800 19,800 Budgeted ending inventory (lbs.) 5,940 5,490 Total materials requirements (lbs.) 22,740 25,290 Budgeted beginning inventory (lbs.) (3,680) (5,940) Materials to be purchased (lbs.) 19,060 19,350 Direct material cost per lb. Total budgeted direct materials $76,240 $77,400

MCO LEATHER GOODS Direct Labor Budget For the Months of September and October September October Budgeted production (units) 5,600 6,600 DL hours required perunit 0.7 0.7 Total direct labor hours needed 3,920 4,620 Direct labor rate per hour $17 $17 Total budgeted direct labor $66,640 $78,540

MCO LEATHER GOODS Factory Overhead Budget For the Months of September and October September October Total direct labor hours needed 3,920 4,620 VOH rate per DL hour 53 Budgeted variable overhead $11,760 $13,860 Budgeted fixed overhead $20,000 $20,000 Total budgeted factory overhead $231,760 $33,860