Question

MCO Leather Goods manufactures leather purses. Each purse requires 2 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 $16,000 per month. The company's policy is to end each month with direct materials inventory equal to 20% of the next month's materials requirement. At the end of August the company had 3,580 pounds of direct materials in inventory. The company's production budget reports the following. Production Budget Units to be produced September 5,300 October 6,600 November 6,000 (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.

Answer 1

Solution

MCO LEATHER GOODS
Direct Materials Budget
For the Months of September and October
	September	October
Budgeted production (units)	5300	6600
Materials requirements per unit (lbs.)	2	2
Materials needed for production (lbs.)	10600	13200
Budgeted ending inventory (lbs.)	2640	2400*
Total materials requirements (lbs.)	13240	15600
Budgeted beginning inventory (lbs.)	3580	2640
Materials to be purchased (lbs.)	9660	12960
Direct material cost per lb.	$          4.00	$          4.00
Total budgeted direct materials	$ 38,640.00	$ 51,840.00

*6000 x 2 x 20%

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MCO LEATHER GOODS
Direct Labor Budget
For the Months of September and October
	September	October
Budgeted production (units)	5300	6600
DL hours required per unit	0.7	0.7
Total direct labor hours needed	3710	4620
Direct labor rate per hour	$        19.00	$         19.00
Total budgeted direct labor	$ 70,490.00	$ 87,780.00

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MCO LEATHER GOODS
Factory Overhead Budget
For the Months of September and October
	September	October
Total direct labor hours needed	3710	4620
VOH rate per DL hour	$          3.00	$          3.00
Budgeted variable overhead	$ 11,130.00	$ 13,860.00
Budgeted fixed overhead	$ 16,000.00	$ 16,000.00
Total budgeted factory overhead	$ 27,130.00	$ 29,860.00