Question
MCO Leather Goods manufactures leather purses. Each purse requires 3 pounds of direct materials at a cost of $4 per pound and 0.7 direct labor
MCO Leather Goods manufactures leather purses. Each purse requires 3 pounds of direct materials at a cost of $4 per pound and 0.7 direct labor hours at a rate of $17 per hour. Variable manufacturing overhead is charged at a rate of $2 per direct labor hour. Fixed manufacturing overhead is $13,000 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 2,680 pounds of direct materials in inventory. The companys production budget reports the following. |
Production Budget | September | October | November |
Units to be produced | 5,200 | 6,300 | 6,100 |
|
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