Question

Shadee Corp. expects to sell 530 sun visors in May and 380 in June. Each visor sells for $19. Shadee’s beginning and ending finished goods inventories for May are 85 and 55 units, respectively. Ending finished goods inventory for June will be 55 units.

Each visor requires a total of $4.50 in direct materials that includes an adjustable closure that the company purchases from a supplier at a cost of $2.00 each. Shadee wants to have 31 closures on hand on May 1, 22 closures on May 31, and 26 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $800 per month, and variable manufacturing overhead is $0.75 per unit produced.

Required:

1. Determine Shadee's budgeted cost of closures purchased for May and June.

2. Determine Shadee's budget manufacturing overhead for May and June.

Answer 1

Answer 1

	May	June
Budgeted cost of closures purchased	$ 982.00	$ 768.00

Calculations:

	May	June
Sale units	530	380
Add: Closing Stock of Finished Goods	55	55
Less: Opening Stock of Finished goods	85	55
Production	500	380
Material per visor	1	1
Requirement of Material	500	380
Add: Closing Stock of Raw material	22	26
Less: Opening Stock of Raw material	31	22
Material to be purchased	491	384
Per unit cost	$      2.00	$      2.00
Budgeted cost of closures purchased	$ 982.00	$ 768.00

Answer 2

	May	June
Budgeted manufacturing overhead	$        1,175	$        1,085

Calculations:

	May	June
Units to be produced	500	380
Variable Overhead per unit	$          0.75	$          0.75
Variable Overhead	$           375	$           285
Fixed Overhead	$           800	$           800
Budgeted manufacturing overhead	$        1,175	$        1,085

In case of any doubt, please comment.