Question

Shadee Corp. expects to sell 570 sun visors in May and 400 in June. Each visor sells for $14. Shadee’s beginning and ending finished goods inventories for May are 75 and 60 units, respectively. Ending finished goods inventory for June will be 65 units.

Each visor requires a total of $4.00 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 34 closures on hand on May 1, 18 closures on May 31, and 25 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 $10 per hour.         

Required:
1. Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is $1.50.) (Round your answer to 2 decimal places.)

 

2. Compute the Shadee’s budgeted cost of goods sold for May and June. (Do not round your intermediate values. Use rounded cost per unit in intermediate calculations.)

Each visor requires a total of $4.00 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 34 closures on hand on May 1, 18 closures on May 31, and 25 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,100 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 $10 per hour.   

Additional information:

• Selling costs are expected to be 6 percent of sales.
• Fixed administrative expenses per month total $1,300.

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.)

 

Each visor requires a total of $4.00 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 34 closures on hand on May 1, 18 closures on May 31, and 25 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 $10 per hour.        

Additional information:

• Selling costs are expected to be 6 percent of sales.
• Fixed administrative expenses per month total $1,300.

Required:
Complete Shadee's budgeted income statement for the months of May and June. (Note: Assume that fixed overhead per unit is $1.50.) (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

1.

Direct Material	$           4.00
Direct Labor	$           1.00
Variable Overhead	$           2.00
Fixed Overhead	$           1.50
Budgeted Manufacturing Cost per visor	$           8.50

2.

	May	June
Expected Sales units	570	400
Budgeted Manufacturing Cost per visor	$           8.50	$              8.50
Budgeted Cost of Goods Sold	$   4,845.00	$      3,400.00

3.

Selling and Administrative Expense Budget
	May	June
Sales Revenue	$    7,980.00	$      5,600.00
Selling Costs	$       478.80	$         336.00
Fixed Administrative expenses	$    1,300.00	$      1,300.00
Budgeted Selling and administrative expenses	$   1,778.80	$      1,636.00

4.

Income Statement
	May	June
Sales Revenue	$    7,980.00	$      5,600.00
Cost of Goods Sold	$    4,845.00	$      3,400.00
Gross Profit	$   3,135.00	$      2,200.00
Selling and administrative expenses	$    1,778.80	$      1,636.00
Net Operating Income	$   1,356.20	$         564.00