Question

Shadee Corp. expects to sell 570 sun visors in May and 300 in June. Each visor sells for $28. Shadee’s beginning and ending finished goods inventories for May are 75 and 50 units, respectively. Ending finished goods inventory for June will be 60 units. Each visor requires a total of $5.00 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 27 closures on hand on May 1, 21 closures on May 31, and 20 closures on June 30 and variable manufacturing overhead is $1.00 per unit produced. Suppose that each visor takes 0.90 direct labor hours to produce and Shadee pays its workers $11 per hour. Additional information: Selling costs are expected to be 8 percent of sales. Fixed administrative expenses per month total $1,700. Required: Complete Shadee's budgeted income statement for the months of May and June. (Note: Assume that fixed overhead per unit is $3.00.) (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

Solution:

Sales Budget - Shadee Corp
Particulars	May	June
Expected sales units	570	300
Selling price per unit	$28.00	$28.00
Budgeted Total Sales	$15,960.00	$8,400.00

Computation of budgeted manufacturing cost per visor - Shadee Corp.
Particulars	Per Unit
Direct Material	$5.00
Direct labor (0.9*$11)	$9.90
Variable manufacturing overhead	$1.00
Fixed manufacturing overhead	$3.00
Budgeted manufacturing cost per unit	$18.90

Computation of budgeted cost of goods sold - Shadee Corp
Particulars	May	June
Expected sales units	570	300
Manufacturing cost per unit	$18.90	$18.90
Budgeted cost of goods sold	$10,773.00	$5,670.00

Budgeted Selling & Administrative Expenses - Shadee Corp
Particulars	May	June
Budgeted sales	$15,960.00	$8,400.00
Selling cost	$1,276.80	$672.00
Fixed administrative expenses	$1,700.00	$1,700.00
Budgeted selling & Adminstrative expenses	$2,976.80	$2,372.00

Budgeted Income Statement - Shadee Corp
Particulars	May	June
Sales revenue	$15,960.00	$8,400.00
Cost of goods sold	$10,773.00	$5,670.00
Budgeted Gross Margin	$5,187.00	$2,730.00
Selling and administrative expenses:
Variable selling cost	$1,276.80	$672.00
Fixed administrative expenses	$1,700.00	$1,700.00
Budgeted net operating income	$2,210.20	$358.00