Question

Shadee Corp. expects to sell 550 sun visors in May and 320 in June. Each visor sells for $21. Shadee’s beginning and ending finished goods inventories for May are 60 and 45 units, respectively. Ending finished goods inventory for June will be 60 units.

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 $2.00 each. Shadee wants to have 27 closures on hand on May 1, 21 closures on May 31, and 22 closures on June 30 and variable manufacturing overhead is $1.75 per unit produced. Suppose that each visor takes 0.70 direct labor hours to produce and Shadee pays its workers $7 per hour.

Required: 1. Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is $3.) 2. Compute the Shadee’s budgeted cost of goods sold for May and June.

Required 2: compute the Shadee’s budgeted cost of goods sold for May and June.

Answer 1

Solution 1:

Computation of budgeted manufacturing cost per visor - Shadee Corp.
Particulars	Per Unit
Direct Material	$3.50
Direct labor (0.7*$7)	$4.90
Variable manufacturing overhead	$1.75
Fixed manufacturing overhead	$3.00
Budgeted manufacturing cost per unit	$13.15

Solution 2:

Computation of budgeted cost of goods sold - Shadee Corp
Particulars	May	June
Expected sales units	550	320
Manufacturing cost per unit	$13.15	$13.15
Budgeted cost of goods sold	$7,232.50	$4,208.00