Direct materials are

seven

ounces of plastic per kit and the plastic costs

$1

per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is

910

ounces, and the company desires to end each quarter with

10%

of the materials needed for the next quarter's production.

Oliver

desires a balance of

280

ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires

0.75

hours of direct labor at an average cost of

$50

per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is

$0.90

per kit, and fixed overhead is

$155

per quarter.