Question

Shadee Corp. expects to sell 510 sun visors in May and 420 in June. Each visor sells for $21. Shadee’s beginning and ending finished goods inventories for May are 80 and 45 units, respectively. Ending finished goods inventory for June will be 70 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 35 closures on hand on May 1, 22 closures on May 31, and 24 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.

1. Determine Shadees Budgeted Cost of Closures purchased for May and June

2. Determine Shadees budget Manufacturing overhead for may and June

Answer 1

Solutions:

F 5 SOLUTION 1 Computation of Production units - Shadee Corp Particulars May Expected sales units Add: ending inventory 45 Less: Beginning inventory 80 510 June 420 70 45 ooo Estimated production units of visor 475 445 12 12 13 14 15 16 June 445 475 Budgeted Purchase cost of closures - Shadee Corp Particulars May Budgeted Production units Adjustable closure per unit Estimated consumption of Adjustable Closures 475 Add: ending inventory 221 Less: Beginning inventory 351 17 445 19 20 21 Budgeted purchase units of adjustable closures Cost per unit of closures 462.00 $2.00 447.00 $2.00 22 23 Budgeted cost of Closures $924.00 $894.00 28 SOLUTION 2 Budgeted manufacturing overhead budget - Shadee Corp Particulars May June Budgeted Production units 445 Variable overhead cost per unit $2.00 $2.00 29 475 30 31 32 33 Budgeted variable overhead cost Budgeted fixed overhead cost $950.00 $890.00 $1,100.00 $1,100.00 34 35 Budgeted manufacturing overhead $2,050.00 $1,990.00 36 3) Sheet592 Sheet79 (9) Sheet594 Sheet524 (2) Sheet 110 <