MCO Leather Goods manufactures leather purses. Each purserequires 3 pounds of direct materials at a cost of $4 per pound and0.7 direct labor hours at a rate of $14 per hour. Variablemanufacturing overhead is charged at a rate of $2 per direct laborhour. Fixed manufacturing overhead is $17,000 per month. Thecompany’s policy is to end each month with direct materialsinventory equal to 20% of the next month’s materials requirement.At the end of August the company had 4,180 pounds of directmaterials in inventory. The company’s production budget reports thefollowing.
| Production Budget | September | | October | | November | |
| Units to be produced | 5,500 | | 7,200 | | 6,700 | |
|
(1) Prepare direct materials budgets for September andOctober.
(2) Prepare direct labor budgets for September andOctober.
(3) Prepare factory overhead budgets for Septemberand October.
