Question

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.

Answer 1

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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