Question

Shadee Corp. expects to sell 570 sun visors in May and 430 in June. Each visor sells for $27. Shadee’s beginning and ending finished goods inventories for May are 85 and 50 units, respectively. Ending finished goods inventory for June will be 65 units.

Each visor requires a total of $4.50 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 31 closures on hand on May 1, 23 closures on May 31, and 25 closures on June 30. Additionally, Shadee’s fixed manufacturing overhead is $1,100 per month, and variable manufacturing overhead is $1.25 per unit produced.

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

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

Answer 1

1.

Direct Material Budget
	May	June
Units to be produced	535	445
Raw Material Per unit	1	1
Raw Material for Production	535	445
Add : Desired Ending Inventory	23	25
Total Material Required	558	470
Less : Beginning Inventory	31	23
Material to be purchased	527	447
Cost per Closure	$              4.50	$             4.50
Budgeted Cost of Closures to be purchased	$      2,371.50	$     2,011.50

Production Budget
	May	June
Sales units	570	430
Add : Desired Ending Inventory	50	65
Total Goods Required	620	495
Less : Beginning Inventory	85	50
Production Required	535	445

2.

Manufacturing Overhead Budget
	May	June
Units to be produced	535	445
Variable manufacturing overhead per unit	$              1.25	$             1.25
Total Variable manufacturing overhead	$         668.75	$         556.25
Fixed Manufacturing Overhead	$      1,100.00	$     1,100.00
TOtal Manufacturing Overhead	$      1,768.75	$     1,656.25

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