Question

Shadee Corp. expects to sell 540 sun visors in May and 300 in June. Each visor sells for $22. Shadee’s beginning and ending finished goods inventories for May are 70 and 45 units, respectively. Ending finished goods inventory for June will be 55 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 35 closures on hand on May 1, 17 closures on May 31, and 24 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,200 per month, and variable manufacturing overhead is $1.00 per unit produced

1. Determine Shadee's budgeted cost of closures purchased for May and June.

2. Determine Shadee's budget manufacturing overhead for May and June

Please explain how you get each number. Thank you

Answer 1

1.
	May	June
Budgeted units of visors to be sold	540	300
(+) Ending inventory of visor	45	55
(-) Beginning inventory visor	70	45
Units to be produced of visor	515	310
(*) Closures required per unit visor	1	1
Closures required for production	515	310
(+) Ending inventory Closures	17	24
(-) Beginning inventory Closures	35	17
Closures to be purchased	497	317
(*) Cost per closure	2.00	2.00
Budgeted cost of closures purchased	994.00	634.00

2.
	May	June
Units to be produced of visor	515	310
(*) Variable manufacturing overhead per unit	1.00	1.00
Variable manufacturing overhead	515.00	310.00
(+) Fixed manufacturing overhead	1200	1200
Budgeted manufacturing overhead	1715.00	1510.00

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