Question

Shadee Corp. expects to sell 550 sun visors in May and 380 in June. Each visor sells for $16. Shadee’s beginning and ending finished goods inventories for May are 65 and 40 units, respectively. Ending finished goods inventory for June will be 65 units.

Each visor requires a total of $5.50 in direct materials that includes an adjustable closure that the company purchases from a supplier at a cost of $2.50 each. Shadee wants to have 28 closures on hand on May 1, 17 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 0.30 direct labor hours to produce and Shadee pays its workers $8 per hour.         

Required:
1. Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is $1.40.) (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.)

3. Each visor requires a total of $5.50 in direct materials that includes an adjustable closure that the company purchases from a supplier at a cost of $2.50 each. Shadee wants to have 28 closures on hand on May 1, 17 closures on May 31, and 20 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,000 per month, and variable manufacturing overhead is $1.00 per unit produced. Each visor takes 0.30 direct labor hours to produce and Shadee pays its workers $8 per hour.   

Additional information:

• Selling costs are expected to be 10 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.)

Answer 1

1.

Direct material (inc. closure)	$       5.50
Add: Dire ct labor (0.3 x $ 8)	$       2.40
Add: Variable manufacturing overhead	$       1.00
Add: Fixed manufacturing overhead	$       1.40
Total manufacturing cost per unit	$    10.30

2.

	May	June
Number of Budgeted Sales Units	550	380
x Cost of Goods sold per unit	$            10.30	$          10.30
Budgeted Cost of Goods sold	$             5,665	$           3,914

3.

	May	June
Sales	$ 8,800	$ 6,080
Selling cost	$    880	$    608
Administrative expenses	$ 1,300	$ 1,300
Total Selling & Administrative expenses	$ 2,180	$ 1,908

Sales for May = 550 x $ 16 = $ 8,800

Selling cost for May = $ 8,800 x 0.10 = $ 880

Sales for June = 380 x $ 16 = $ 6,080

Selling cost for June = $ 6,080 x 0.10 = $ 608