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Question - MCO Leather Goods manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $3 per pound and 0.7 direct labor hours at a rate of $13 per hour. Variable manufacturing overhead is charged at a rate of $2 per direct labor hour. Fixed manufacturing overhead is $12,000 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
4,800
6,400
6,700
(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.
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