Exercise 20-15 (Algo) Manufacturing: Direct materials, direct labor, and overhead budgets LO P1

MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $4 per pound and 0.7 direct labor hour at a rate of $10 per hour. Variable overhead is budgeted at a rate of $2 per direct labor hour. Budgeted fixed overhead is $14,000 per month. The companys policy is to end each month with direct materials inventory equal to 40% of the next months direct materials requirement. At the end of August the company had 3,520 pounds of direct materials in inventory. The companys production budget reports the following.

Production Budget	September	October	November
Units to produce	4,400	6,800	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.