Prepare a Production Budget EcoBags manufactures cloth shopping bags. The controller is preparing a budget for the coming year and asks for your assistance. The following costs and other data apply to bag production:

Direct materials per bag

1.0 yard cotton at $4 per yard

0.2 yards canvas finish at $12 per yard

Direct labor per bag

0.5 hour at $18 per hour

Overhead per bag

Indirect labor $0.60

Indirect materials . 0.20

Power 0.40

Equipment costs 1.30

Building occupancy .. 0.90

Total overhead per unit $3.40

You learn that equipment costs and building occupancy are fixed and are based on a normal production of 600,000 units per year. Other overhead costs are variable. Plant capacity is sufficient to produce 750,000 units per year. Labor costs per hour are not expected to change during the year. However, the cotton supplier has informed EcoBags that it will impose a 20 percent price increase at the start of the coming budget period. No other costs are expected to change. During the coming budget period, EcoBags expects to sell 540,000 bags. Finished goods inventory is targeted to increase from the current balance of 120,000 units to 210,000 units to prepare for an expected sales increase the year after next as a result of legislation in several states regarding plastic bags. Production will occur evenly throughout the year. Inventory levels for cotton and canvas are expected to remain unchanged throughout the year. There is no work-in-process inventory. Required Prepare a production budget and estimate the materials, labor, and overhead costs for the coming year.