Question

Shadee Corp. expects to sell 630 sun visors in May and 360 in June. Each visor sells for $20. Shadee’s beginning and ending finished goods inventories for May are 75 and 45 units, respectively. Ending finished goods inventory for June will be 60 units. d) 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 33 closures on hand on May 1, 20 closures on May 31, and 27 closures on June 30 and variable manufacturing overhead is $1.25 per unit produced. Suppose that each visor takes 0.70 direct labor hours to produce and Shadee pays its workers $11 per hour. - Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is $1.30.) - Compute the Shadee’s budgeted cost of goods sold for May and June. e) 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 33 closures on hand on May 1, 20 closures on May 31, and 27 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,200 per month, and variable manufacturing overhead is $1.25 per unit produced. Each visor takes 0.70 direct labor hours to produce and Shadee pays its workers $11 per hour. Additional information: Selling costs are expected to be 6 percent of sales. Fixed administrative expenses per month total $1,200. - Determine Shadee's budgeted selling and administrative expenses for May and June. f) 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 33 closures on hand on May 1, 20 closures on May 31, and 27 closures on June 30 and variable manufacturing overhead is $1.25 per unit produced. Suppose that each visor takes 0.70 direct labor hours to produce and Shadee pays its workers $11 per hour. Additional information: Selling costs are expected to be 6 percent of sales. Fixed administrative expenses per month total $1,200. - Complete Shadee's budgeted income statement for the months of May and June. (Note: Assume that fixed overhead per unit is $1.30.)

Answer 1

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		May	June
A	Expected Sale (units)	630	360
B	Begining Finished goods inventory	75	45
C	Ending Finished goods inventory	45	60
A+C-B	Hence Production	600	375

Shadee’s budgeted manufacturing cost per visor
Variable cost:	Per Unit$
-Direct Material	3.5
-Direct Labor 11*0.7	7.7
-Variable Overheads	1.25
-FIxed Overheads	1.3
Shadee’s budgeted cost of goods sold for May and June
	May	June
Unit Sold	630	360
Direct Material (Unit Sold* per unit cost 3.5)	2205	1260
Direct Labor (unit sold* per unit cost 7.7)	4851	2772
Variable Overhead (Unit sold*per unti cost 1.25)	787.5	450
FIxed Overhead (Unit produced in may 600*1.3))	780	780
Total Cost of goods sold	8623.5	5262
Shadee’s budgeted Selling and administrative expenses
	May	June
Unit Sold	630	360
Total Sale (Unit*20)	12600	7200
	May	June
Selling Cost (6% of sale)	756	432
Fixed Administrative Expenses	1200	1200
Budgeted Selling and administrative expenses	1956	1632
Shadee’s budgeted income statement
	May	June
Total Sale (Unit*20)	12600	7200
Less: Cost of goods sold	8623.5	5262
Gross Margin	3976.5	1938
Less: Selling and Administrative Expense	1956	1632
Operating Income	2020.5	306