Question & Answer: MCO Leather Goods manufactures leather purses. Each purse requires 3 pounds of direct materials at a cost of $…..

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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 $12 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $18,000 per month. The companys policy is to end each month with direct materials inventory equal to 40% of the next months materials requirement. At the end of August the company had 2,780 pounds of direct materials in inventory The companys production budget reports the following Production BudgetSeptember Units to be produced OctoberNovember 6,300 5,500 6,700 (1) Prepare direct materials budgets for September and October MCO Leather Goods Direct Materials Budget For the Months of September and October September October Budgeted production (units) Materials requirements per unit Materials needed for production (Ibs.) Budgeted ending inventory (Ibs.) Total materials requirements (bs.) Budgeted beginning inventory (Ibs.) Materials to be purchased (Ibs.) Direct material cost per lb. Total budgeted direct materials
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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 $12 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $18,000 per month. The company’s policy is to end each month with direct materials inventory equal to 40% of the next month’s materials requirement. At the end of August the company had 2,780 pounds of direct materials in inventory The company’s production budget reports the following Production BudgetSeptember Units to be produced OctoberNovember 6,300 5,500 6,700 (1) Prepare direct materials budgets for September and October MCO Leather Goods Direct Materials Budget For the Months of September and October September October Budgeted production (units) Materials requirements per unit Materials needed for production (Ibs.) Budgeted ending inventory (Ibs.) Total materials requirements (bs.) Budgeted beginning inventory (Ibs.) Materials to be purchased (Ibs.) Direct material cost per lb. Total budgeted direct materials

Expert Answer

 

Ans.

MCO Leather Goods
Direct Material Budget
For the month of september & October
No. Particular September October
a. Budgeted Production(units) 5500 6700
b. Material reqirement per unit 3 3
c. Material needed for production(Ibs)(a*b) 16500 20100
d. Budgeted Ending inventory (40% of next month ending) 2680 2520
e. Total material requirement (c+d) 19180 22620
f. Budgeted beginning inventory 2780 2680
g. Material to be purchased(e-f) 16400 19940
h. Direct material cost per Ib. 4 4
i. Total budgeted direct materials(g*h) 65600 79760
MCO Leather Goods
Direct Labour Budget
For the month of september & October
No. Particular September October
a. Budget Production(units) 5500 6700
b. Direct labour required per unit 0.7 0.7
c. Total direct labour hours needed(a*b) 3850 4690
d. Direct labour rate per hour 12 12
e. Total budgeted direct labour(c*d) 46200 56280
MCO Leather Goods
Factory overead budget
For the month of september & October
No. Particular September October
a. Total direct labour hhours needed(as calculated above) 3850 4690
b. Variable overhead rate per DLH 3 3
c. Budgeted variable overhead(a*b) 11550 14070
d. Budgeted Fixed 18000 18000
e. Total budgeted factory overhead(c+d) 29550 32070

 

 

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