Question

Shadee Corp. expects to sell 640 sun visors in May and 430 in June. Each visor sells for $17. Shadee’s beginning and ending finished goods inventories for May are 75 and 55 units, respectively. Ending finished goods inventory for June will be 70 units.

Each visor requires a total of $5.50 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 33 closures on hand on May 1, 18 closures on May 31, and 23 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.

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

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Suppose that each visor takes 0.10 direct labor hours to produce and Shadee pays its workers $6 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.)

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Each visor requires a total of $5.50 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 33 closures on hand on May 1, 18 closures on May 31, and 23 closures on June 30 and variable manufacturing overhead is $2.00 per unit produced. Suppose that each visor takes 0.10 direct labor hours to produce and Shadee pays its workers $6 per hour.

Required:

1. Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is $3.)

2. Compute the Shadee’s budgeted cost of goods sold for May and June.

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Each visor requires a total of $5.50 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 33 closures on hand on May 1, 18 closures on May 31, and 23 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. Each visor takes 0.10 direct labor hours to produce and Shadee pays its workers $6 per hour.

Additional information:

• Selling costs are expected to be 8 percent of sales.
• Fixed administrative expenses per month total $1,400.

Required:

Determine Shadee's budgeted selling and administrative expenses for May and June. (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

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Each visor requires a total of $5.50 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 33 closures on hand on May 1, 18 closures on May 31, and 23 closures on June 30 and variable manufacturing overhead is $2.00 per unit produced. Suppose that each visor takes 0.10 direct labor hours to produce and Shadee pays its workers $6 per hour.

Additional information:

• Selling costs are expected to be 8 percent of sales.
• Fixed administrative expenses per month total $1,400.

Required:

Complete Shadee's budgeted income statement for the months of May and June. (Note: Assume that fixed overhead per unit is $3.00.) (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

1.

Purchases Budget : Closures
	May	June
Budgeted Production in Units	620	445
Add: Desired Ending Inventory of Closures	18	23
Total closures needed	638	468
Less: Beginning Inventory	33	18
Budgeted purchases of closures in units	605	450
Cost of closures per unit	$ 2	$ 2
Budgeted Cost of Closures Purchased	$ 1,210	$ 900

2.

Production Budget
	May	June
Budgeted Sales in Units	640	430
Add: Desired Ending Inventory	55	70
Total Finished Inventory Needed	695	500
Less: Beginning Inventory	75	55
Budgeted Production in Units	620	445

3.

Manufacturing Overhead Budget
	May	June
Budgeted Production in Units	620	445
Variable Overhead per Unit	$ 2	$ 2
Total Variable Overhead	$ 1,240	$ 890
Fixed Overhead per Month	1,000	1,000
Budgeted Manufacturing Overhead	$ 2,240	$ 1,890

4.

Direct Labor Budget
	May	June
Budgeted Production in Units	620	445
Direct Labor Hours Needed	62	44.5
Direct Labor Hour Rate	$ 6	$ 6
Budgeted Direct Labor Cost	$ 372	$ 267

5.

Direct Materials	$ 5.50
Direct Labor Cost	0.60
Variable Manufacturing Overhead	2.00
Fixed Overhead	3.00
Total Manufacturing Cost per unit	$ 11.10

6.

	May	June
Budgeted Sales in Units	640	430
Manufacturing Cost per Unit	$ 11.10	$ 11.10
Budgeted Cost of Goods Sold	$ 7,104	$ 4,773

7.

	May	June
Selling Costs ( Sales x 8 % )	$ 870.40	$ 584.80
Administrative Expenses	1,400	1,400
Budgeted Selling and Administrative Expenses	$ 2,270.40	$ 1,984.80

8.

Budgeted Income Statement
	May	June
Budgeted Sales	$ 10,880	$ 7,310
Budgeted Cost of Goods Sold	(7,104)	(4,773)
Gross Profit	3,776	2,537
Budgeted Selling and Administrative Expenses	(2,270.40)	(1,984.80 )
Budgeted Net Operating Income	$ 1,505.60	$ 552.20