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.
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Production Budget
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September
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October
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November
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Units to be produced
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4,800
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6,400
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6,700
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(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.