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

MCO Leather manufactures leather purses. Each purse requires 3 pounds of direct materials at a cost of $5 per pound and 0.7 direct labor hours at a rate of $13 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $14,000 per month. The companys policy is to end each month with direct materials inventory equal to 20% of the next months materials requirement. At the end of August the company had 2,880 pounds of direct materials in inventory. The companys production budget reports the following.

Production Budget	September		October		November
Units to be produced	5,300		7,100		6,100

(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.