Question

In: Accounting

Shadee Corp. expects to sell 550 sun visors in May and 420 in June. Each visor...

Shadee Corp. expects to sell 550 sun visors in May and 420 in June. Each visor sells for $20. Shadee’s beginning and ending finished goods inventories for May are 90 and 50 units, respectively. Ending finished goods inventory for June will be 60 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 26 closures on hand on May 1, 20 closures on May 31, and 22 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,200 per month, and variable manufacturing overhead is $1.75 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.)

Solutions

Expert Solution

  • All working forms part of the answer
  • Working 1

May

June

Expected Sales of finished units

550

420

Add: Ending inventory

50

60

Total requirement

600

480

Less: Beginning inventory

90

50

Units to be produced

510

430

  • Requirement 1

May

June

Units to be produced

510

430

Closures requirement [1 unit for 1 finished unit]

510

430

Add: Ending inventory

20

22

Total requirement

530

452

Less: Beginning inventory

26

20

Closures purchased

504

432

Budgeted cost of closure purchased at $2

$          1,008.00

$                 864.00

  • Requirement 2

May

June

Units to be produced

510

430

Variable manufacturing overhead at $1.75 per unit

$             892.50

$                 752.50

Fixed manufacturing overhead

$          1,200.00

$              1,200.00

Budgeted Manufacturing overhead

$          2,092.50

$              1,952.50


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