Question

Shadee Corp. expects to sell 590 sun visors in May and 440 in June. Each visor sells for $25. Shadee’s beginning and ending finished goods inventories for May are 85 and 60 units, respectively. Ending finished goods inventory for June will be 50 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 $2.50 each. Shadee wants to have 32 closures on hand on May 1, 22 closures on May 31, and 21 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,600 per month, and variable manufacturing overhead is $2.25 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

Production Budget
	May	June
No.of Visor Require for Sale	590	440
Desired Ending invenry	60	50
Total needed	650	490
Less; Beginning Inventory	85	60
No. of Visor required	565	430
Closure Purchase Budget
	May	June
No. of Closure required to sale visor	565	430
Desired Ending invenry of Closure	22	21
Total needed	587	451
Less; Beginning Inventory	32	22
Total Closure to be Purchased	597	452
Cost of closure	$2.50	$2.50
Purchase cost of Closure	$1,492.50	$1,130.00
Budgeted Manufacturign Overhead
	May	June
No. of Visor required to be Produced	565	430
Variable Manufacturign Overhead per Unit	$2.25	$2.25
Variable Manufacturign Overhead Budget (a)	$1,271.25	$967.50
Fixed Manufacturign Overhead Budget (b)	$1,600.00	$1,600.00
Total Budgeted Manufacturign Overhead Budget (a+b)	$2,871.25	$2,567.50