Question

# Shadee Corp. expects to sell 540 sun visors in May and 320 in June. Each visor...

Shadee Corp. expects to sell 540 sun visors in May and 320 in June. Each visor sells for \$21. Shadee’s beginning and ending finished goods inventories for May are 85 and 60 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 26 closures on hand on May 1, 17 closures on May 31, and 23 closures on June 30 and variable manufacturing overhead is \$1.50 per unit produced. Suppose that each visor takes 0.20 direct labor hours to produce and Shadee pays its workers \$6 per hour. Required:

1. Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is \$7.)

2. Compute the Shadee’s budgeted cost of goods sold for May and June.

Solution :

(1) Budgeted Manufacturing Cost per Visor :

 Direct Material per Visor \$ 4.00 Direct Laboe per Visor (0.20 * \$ 6.00) \$ 1.20 Variable Manufacturing OH \$ 1.50 Fixed Manufacturing OH \$ 7.00 Budgeted Manufacturing Cost per Visor \$ 13.70

(2) Budgeted Cost of Goods Sold :

 May June (a) Budgeted Units to be Sold 540 320 (b) Budgeted Manufacturing Cost per Visor \$ 13.70 \$ 13.70 (c) Budgeted Cost of Goods Sold (a * b) \$ 7398 \$ 4,384

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