Homer, Inc. manufactures model airplane kits and projects production at 550, 420, 150, and 350 kits for the next four quarters.

Pre pare Homer's direct materialsbudget, direct laborbudget, and manufacturing overhead budget for the year. Round the direct labor hours needed forproduction, budgeted overheadcosts, and predetermined overhead allocation rate to two decimal places. Round other amounts to the nearest whole number.

Begin by preparing Homer's direct materials budget.

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Direct materials are 7 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 860 ounces, and the company desires to end each quarter with 30% of the materials needed for the nextquarter's production. Homer desires a balance of 270 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 $22 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is $0.80 perkit, and fixed overhead is $125 per quarter.