Question

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 $2.50 each. Shadee wants to have 27 closures on hand on May 1, 21 closures on May 31, and 28 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $800 per month, and variable manufacturing overhead is $2.00 per unit produced. Required: 1. Determine Shadee's budgeted cost of closures purchased for May and June. (Round your answers to 2 decimal places.) Shadee Corp. expects to sell 610 sun visors in May and 390 in June. Each visor sells for $15. Shadee’s beginning and ending finished goods inventories for May are 60 and 55 units, respectively. Ending finished goods inventory for June will be 55 units.

Answer 1

Calculations	Particulars	May	June
A	Sales units	610	390
B	Closing Inventory	55	55
C = B of previous period	Beginning Inventory	60	55
D = A+B-C	Production	605	390
E	Closure required per unit	1	1
F = D x E	Total closures consumed in production	605	390
G	Closing Inventory of closures	21	28
H = G of previous period	Beginning Inventory of closures	27	21
I = F+G-H	Total purchases of closures	599	397
J	Price per closure	2.5	2.5
K = I x J	Total cost of purchases of closures	1497.5	992.5