Question

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.)

Answer 1

• 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