MCO Leather Goods manufactures leather purses. Each purse requires 3 pounds of d

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 $19 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 3,080 pounds of direct materials in inventory. The company's production budget reports the following. Production Budget September October November Units to be produced 5,000 6,700 6,600 Prepare direct materials budgets for September and October. Prepare direct labor budgets for September and October. (Round "DL hours required per unit" answers to one decimal place.) Prepare factory overhead budgets for September and October.

Explanation / Answer

         1 Mco Leather Goods Direct Materials Budget for the Month of Sep & Oct Details September October November Budgeted production units                5,000                 6,700                 6,600 Materials required per unit-lbs                        3                         3                         3 Materials needed for production -lbs             15,000               20,100              19,800 Required ending Inventory -lbs                6,030                 5,940 Total Materials required-lbs             21,030               26,040 Less: Beginning inventory -lbs                3,080                 6,030 Materials to be purchased -lbs             17,950               20,010 Direct Materials cost per lb                        4                         4 Total Budgeted Direct Materials cost             71,800               80,040          2 Mco Leather Goods Direct Labor Budget for the Month of Sep & Oct Details September October Budgeted production units                5,000                 6,700 DL Hrs required per unit                  0.70                   0.70 Total Direct Labor Hrs needed                3,500                 4,690 Direct Labor Rate per hour                      19                       19 Total Budgeted Direct Labor cost             66,500               89,110          3 Mco Leather Goods Direct Labor Budget for the Month of Sep & Oct Details September October Total Direct Labor Hrs needed                3,500                 4,690 VOH rate per Direct Labor Hr                  3.00                   3.00 Total Budgted Variable OH cost             10,500               14,070 Budgeted Fixed OH             20,000               20,000 Total Budgeted Factory Overhead=             30,500               34,070

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