Chistosa Company produces stuffed toy animals; one of these is Betty Rabbit. Each rabbit takes 0.10 yards of fabric and three ounces of poly-fiberfill. Fabric costs $3.50 per yard, and poly-fiberfill is $0.05 per ounce. Chistosa has budgeted production of stuffed rabbits for the next four months as follows:

Units

October ...40,000

November ..80,000

December ..50,000

January ...60,000

Inventory policy requires that sufficient material be in ending monthly inventory to satisfy 15 percent of the following month’s production needs and sufficient poly-fiberfill be in inventory to satisfy 30 percent of the following month’s production needs. Inventory of material and poly-fiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy.

Each rabbit produced requires (on average) 0.2 direct labor per hour. The average cost of direct labor is $10.50 per hour.

Required:

1. Prepare a direct materials purchases budget of fabric for the last quarter of the year, showing purchases in units and in dollars for each month and for the quarter in total.

2. Prepare a direct materials purchases budget of poly-fiberfill for the last quarter of the year, showing purchases in units and in dollars for each month and for the quarter in total.

3. Prepare a direct labor budget for the last quarter of the year, showing the hours needed and the direct labor cost for each month and for the quarter in total.