Question

MCO Leather manufactures leather purses. Each purse requires 3 pounds of direct materials at a cost of $3 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 $13,000 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 3,180 pounds of direct materials in inventory. The company’s production budget reports the following.

Production Budget	September		October		November
Units to be produced	4,700		6,600		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.

Prepare direct materials budgets for September and October.

MCO Leather Direct Materials Budget For the Months of September and October September October Budgeted production (units) Materials requirements per unit (lbs.) Materials needed for production (lbs.) 0 0 Budgeted ending inventory (lbs.) Total materials requirements (lbs.) 0 0 Budgeted beginning inventory (lbs.) Materials to be purchased (lbs.) 0 0 Direct material cost per lb. Total budgeted direct materials $0 $0

• 	MCO Leather Direct Labor Budget For the Months of September and October September October Budgeted production (units) DL hours required per unit Total direct labor hours needed 0 0 Direct labor rate per hour Total budgeted direct labor $0 $0

	MCO Leather Factory Overhead Budget For the Months of September and October September October Total direct labor hours needed VOH rate per DL hour Budgeted variable overhead 0 0 Budgeted fixed overhead Total budgeted factory overhead $0 $0

Answer 1

Prepare direct materials budgets for September and October.

MCO Leather Direct Materials Budget For the Months of September and October September October Budgeted production (units) 4700 6600 Materials requirements per unit (lbs.) 3 3 Materials needed for production (lbs.) 14100 19800 Budgeted ending inventory (lbs.) 5940 5490 Total materials requirements (lbs.) 20040 25290 Budgeted beginning inventory (lbs.) -3180 -5940 Materials to be purchased (lbs.) 16860 19350 Direct material cost per lb. 3 3 Total budgeted direct materials 50580 58050

• 	MCO Leather Direct Labor Budget For the Months of September and October September October Budgeted production (units) 4700 6600 DL hours required per unit 0.7 0.7 Total direct labor hours needed 3290 4620 Direct labor rate per hour 19 19 Total budgeted direct labor 62510 87780

	MCO Leather Factory Overhead Budget For the Months of September and October September October Total direct labor hours needed 3290 4620 VOH rate per DL hour 3 3 Budgeted variable overhead 9870 13860 Budgeted fixed overhead 13000 13000 Total budgeted factory overhead $22870 $26860