Macchu Company produces stuffed toy animals; one of these is “Andie the Llama.” Each Andie takes 0.20 yard of fabric (white with irregular black splotches) and 10 ounces of polyfiberfill. Fabric costs $3.40 per yard and polyfiberfill is $0.05 per ounce. Macchu has budgeted production of Andies for the next four months as follows: Units October 44,000 November 80,000 December 60,000 January 40,000 Inventory policy requires that sufficient fabric be in ending monthly inventory to satisfy 20 percent of the following month's production needs and sufficient polyfiberfill be in inventory to satisfy 15 percent of the following month's production needs. Inventory of fabric and polyfiberfill at the beginning of October equals exactly the amount needed to satisfy the inventory policy. Each Andie produced requires (on average) 0.10 direct labor hour. The average cost of direct labor is $15 per hour.
