Business, 06.05.2020 03:02 Izzyfizzy

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 $15 per hour. Variable manufacturing overhead is charged at a rate of $3 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 20% of the next month’s materials requirement. At the end of August the company had 2,880 pounds of direct materials in inventory. The company’s production budget reports the following.

Production Budget September October November
Units to be produced 5,200 6,300 6,100

a. Prepare direct materials budgets for September and October.
b. Prepare direct labor budgets for September and October.
c. Prepare factory overhead budgets for September and October.

Answers: 3

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Answer from: latezwardjr15

Direct Materials Purchases Budget Sept 51680 October 60160

Direct labor Budget September 54600 October 66150

Overhead Budget Sept $ 20920 October $23,230

Explanation:

The budgets are calculated in the following ways.

We multiply the required material , direct labor hour or variable overhead rate with the given number of units and then with the cost per unit to get the total costs.

MCO Leather Goods Manufacturers

Direct Materials

Purchases Budget

September October November

Production 5200 6300 6100

Pounds per units * 2 *2 *2

Total Pounds 10400 12600 12200

Cost per pound * $4 * $4 *$4

Total cost 41600 50400 48800

On hand

Inventory + 10080 + 9760 ---

Direct Materials

Purchases Budget 51680 60160

MCO Leather Goods Manufacturers

Direct Labor Budget

September October

Production 5200 6300

Hours required per unit * 0.7 *0.7

Total hours 3640 4410

Rate per hour * $15 *$15

Total labor Cost 54600 66150

MCO Leather Goods Manufacturers

Factory Overhead Budget

September October

Production 5200 6300

Hours required per unit * 0.7 * 0.7

Labor Hours 3640 4410

Variable OH * $3 *$3

Variable Costs $10920 $13230

Fixed OH + $10,000 +$10,000

Total OH $ 20920 $23,230

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MCO Leather Goods manufactures leather purses. Each purse requires 2 pounds of direct materials at a...

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