MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $4 per pound and 0.8 direct labor hours at a rate of $16 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 40% of the next month’s materials requirement. At the end of August the company had 3,680 pounds of direct materials in inventory. The company’s production budget reports the following. Prepare budgets for September and October for (1) direct materials, (2) direct labor, and (3) factory overhead. Production Budget September October November Units to be produced . 4,600 6,200 5,800
MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $4
per pound and 0.8 direct labor hours at a rate of $16 per hour. Variable manufacturing
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 40% of the next month’s materials
requirement. At the end of August the company had 3,680 pounds of direct materials in inventory.
The company’s production budget reports the following. Prepare budgets for September and October for
(1) direct materials, (2) direct labor, and (3) factory overhead.
Production Budget September October November
Units to be produced . 4,600 6,200 5,800
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