Question

Shadee Corp. expects to sell 600 sun visors in May and 350 in June. Each visor sells for $22. Shadee’s beginning and ending finished goods inventories for May are 65 and 40 units, respectively. Ending finished goods inventory for June will be 55 units.

E8-6 Preparing Raw Materials Purchases and Manufacturing Overhead Budgets [LO 8-3c, e]

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 29 closures on hand on May 1, 20 closures on May 31, and 26 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,400 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

Statement Showing Production Budget
	May	June	Total
Sales	600	350	950
Desired Ending inventory	40	55	55
Total Unit Needed	640	405	1005
Less: Beg. Inventory	65	40	65
Production required	575	365	940
Statement Showing Budgeted Cost material Purchase
	May	June	Total
Production unit	575	365	940
RM Required /Visor ( $5.50/$2)=2.75	1581.25	1003.75	2585
Ending Raw Material	20	26	26
Total Raw material Required	1601.25	1029.75	2611
Less: Opening Inventory	29	20	29
Purchase Quantity Required	1572.25	1009.75	2582
Purchase Cost /Pound	$2	$2.00	$2.00
Total Purchase Cost	$3,145	$2,020	$5,164
Statement Showing Manufacturing Overhead Budget
	May	June	Total
Unit Produced	575	365	940
Variable Manufacturing Overhead/Unit	$2.00	$2.00	2
Total Variable Manufacturing Overhead (a)	$1,150.00	$730.00	$1,880.00
Fixed Manufacturing Overhead (b)	$1,400.00	$1,400.00	$2,800.00
Total Manufacturing Overhead Cost (a+b)	$2,550.00	$2,130.00	$4,680.00
Statement Showing Direct Labour Cost Budget
	May	June	Total
Unit Produced	575	365	940
Direct Labour Require/Unit	0.8	0.8	0.8
Total Labour Hour require (a)	460	292	752
Rate /Hour(b)	$7	$7	$7
Total Labour Cost (a*b)	$3,220	$2,044	$5,264