Question

E8-7 Preparing Direct Labor Budget [LO 8-3d]

Shadee Corp. expects to sell 620 sun visors in May and 410 in June. Each visor sells for $20. Shadee’s beginning and ending finished goods inventories for May are 70 and 55 units, respectively. Ending finished goods inventory for June will be 55 units.

References

2.

Required information

Each visor requires a total of $3.50 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 32 closures on hand on May 1, 15 closures on May 31, and 24 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,000 per month, and variable manufacturing overhead is $2.00 per unit produced.

Required:
1. Determine Shadee's budgeted cost of closures purchased for May and June. (Round your answers to 2 decimal places.)



2. Determine Shadee's budget manufacturing overhead for May and June. (Do not round your intermediate values. Round your answers to 2 decimal places.)

Suppose that each visor takes 0.80 direct labor hours to produce and Shadee pays its workers $7 per hour.

Required:
Determine Shadee's budgeted direct labor cost for May and June. (Do not round your intermediate values. Round your answers to 2 decimal places.)

Answer 1

SOLUTION 1
Computation of Production units - Shadee Corp
Particulars	May	June
Expected sales units	620	410
Add: ending inventory	55	55
Less: Beginning inventory	70	55
Estimated production units of visor	605	410
Budgeted Purchase cost of closures - Shadee Corp
Particulars	May	June
Budgeted Production units	605	410
Adjustable closure per unit	1	1
Estimated consumption of Adjustable Closures	605	410
Add: ending inventory	15	24
Less: Beginning inventory	32	15
Budgeted purchase units of adjustable closures	588.00	419.00
Cost per unit of closures	$2.00	$2.00
Budgeted cost of Closures	$1,176.00	$838.00

SOLUTION 2
Budgeted manufacturing overhead budget - Shadee Corp
Particulars	May	June
Budgeted Production units	605	410
Variable overhead cost per unit	$2.00	$2.00
Budgeted variable overhead cost	$1,210.00	$820.00
Budgeted fixed overhead cost	$1,000.00	$1,000.00
Budgeted manufacturing overhead	$2,210.00	$1,820.00

Solution 3:

Budgeted labor cost budget - Shadee Corp
Particulars	May	June
Budgeted Production units	605	410
Direct labor hours per unit	0.80	0.80
Budgeted direct labor hours	484.00	328.00
direct labor cost per hour	$7.00	$7.00
Budgeted direct labor cost	$3,388.00	$2,296.00