Question

MCO Leather manufactures leather purses. Each purse requires 3 pounds of direct materials at a cost of $5 per pound and 0.7 direct labor hours at a rate of $18 per hour. Variable manufacturing overhead is charged at a rate of $2 per direct labor hour. Fixed manufacturing overhead is $10,000 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 4,380 pounds of direct materials in inventory. The company's production budget reports the following. Production Budget September November October Units to be produced 4,700 6,800 5,900 (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 Direct Materials Budget For the Months September and October September October Budgeted production (units) Materials requirements per unit (Ibs.) Materials needed for production (lbs.) 0 Budgeted ending inventory (lbs.) Total materials requirements (Ibs.) 0 Budgeted beginning inventory (Ibs.) Materials to be purchased (lbs.) Direct material cost per lb. Total budgeted direct materials 0 $

Answer 1

Ans. 1	MCO Leather
	Direct Materials Budget
	For the Month of September and October
	Particulars	September	October
	Budgeted production (units)	4700	6800
	(X) Materials requirement per unit	3	3
	Materials needed for production	14100	20400
	Add: budgeted ending inventory	6120	5310
	Total materials requirements	20220	25710
	Less: Budgeted beginning inventory	-4380	-6120
	Materials to be purchased	15840	19590
	(X) Direct materials per unit	$5.00	$5.00
	Total budgeted direct materials	$79,200	$97,950
	*Calculations for Ending inventory:			*Calculations for Beginning inventory:
Months				Months
September	20,400 * 30%	6120		September	Ending inventory of August	4380
October	17,700 * 30%	5310		October	Ending inventory of September	6120
	*Calculations of materials needed for production for the month of November:
	Particulars	November
	Budgeted production (units)	5900
	(X) Materials requirement per unit	3
	Materials needed for production	17700
Ans. 2	MCO Leather
	Direct Labor Budget
	For the Month of September and October
	Particulars	September	October
	Budgeted production (units)	4700	6800
	(X) Direct labor hours	0.7	0.7
	Total labor hours needed	3290	4760
	(X) Wages rate per hour	$18	$18
	Budget direct labor cost	$59,220	$85,680
	*Total labor hours needed = units to be produced * direct labor hours
	*Budgeted direct labor cost = Total labor hours needed * Wages rate per hour
Ans. 3	MCO Leather
	Factory Overhead Budget
	For the Month of September and October
	Particulars	September	October
	Budgeted production (units)	4700	6800
	(X) Variable overhead rate	$2.00	$2.00
	Budgeted variable overhead	$9,400	$13,600
	Budgeted fixed overhead	$10,000	$10,000
	Budgeted total overhead	$19,400	$23,600
	*Budgeted variable overhead = budgeted production * Variable overhead rate per hour
	*Budget total overhead   =   Budgeted variable overhead + Budgeted fixed overhead