Question

Exercise 20-15 Manufacturing: Direct materials, direct labor, and overhead budgets LO P1

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 $10 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $16,000 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 4,180 pounds of direct materials in inventory. The company’s production budget reports the following.

Production Budget	September		October		November
Units to be produced	5,400		6,600		6,500

(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.

MCO LEATHER GOODS 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.) 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

• Complete this question by entering your answers in the tabs below.

• Required 1
• Required 2
• Required 3

• Prepare direct labor budgets for September and October. (Round "DL hours required per unit" answers to one decimal place.)

  	MCO LEATHER GOODS 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 Direct labor rate per hour Total budgeted direct labor

• Prepare factory overhead budgets for September and October.

  	MCO LEATHER GOODS 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 Budgeted fixed overhead Total budgeted factory overhead

• Complete this question by entering your answers in the tabs below.

Answer 1

MCO Leather Direct material Budget For the months September and October
	September	October
Budgeted Production (Units)	5,400	6,600
x Mateial requirement per unit (lbs.)	3 pounds	3 pounds
material needed for production (lbs.)	16,200	19,800
Budgeted ending inventory (lbs.)	7,920 (19,800 x 40%)	7,800 (6,500 x 3 x 40%)
Total material requirement (lbs.)	24,120	27,600
Budgeted Beginning inventory (lbs.)	(4,180)	(7,920)
Materials to be purchased (lbs.)	19,940	19,680
Direct material cost per lb.	$ 4	$ 4
Total budgeted Direct Materials	$ 79,760	$ 78,720
MCO Leather Direct Labour Budget For the months September and October
	September	October
Budgeted Production (Units)	5,400	6,600
x DL hours required per unit	$ 0.70	$ 0.70
Total Direct hours required	3,780	4,620
x Direct labour rate per hour	$ 10	$ 10
Total budgeted direct labor	$ 37,800	$ 46,200
MCO Leather Factory overheads Budget For the months September and October
	March	April
Total Direct hours required	3,780	4,620
x VOH rate per direct labor hour	$ 3	$ 3
Budgeted variable overhead	$ 11,340	$ 13,860
Add: Budgeted Fixed overhead	$ 16,000	$ 16,000
Total Budgeted Fixed Overhead	$ 27,340	$ 29,860