Question

Required information

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Shadee Corp. expects to sell 570 sun visors in May and 300 in June. Each visor sells for $28. Shadee’s beginning and ending finished goods inventories for May are 75 and 50 units, respectively. Ending finished goods inventory for June will be 60 units.

Each visor requires a total of $5.00 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 27 closures on hand on May 1, 21 closures on May 31, and 20 closures on June 30 and variable manufacturing overhead is $1.00 per unit produced. Suppose that each visor takes 0.90 direct labor hours to produce and Shadee pays its workers $11 per hour.

Additional information:

• Selling costs are expected to be 8 percent of sales.
• Fixed administrative expenses per month total $1,700.

Required:

Complete Shadee's budgeted income statement for the months of May and June. (Note: Assume that fixed overhead per unit is $3.00.) (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

What is the Budgeted Gross Margin for May and June?

What is the Budgeted Net Operating Income for May and June?

Answer 1

Shadee Corp. Budgeted Income Statement For The Month May and June
	May	June
Budgeted Sales	$15,960 (570*$28)	$8,400 (300*$28)
Cost of goods sold:
Direct material	2,850 (570*$5)	1,500 (300*$5)
Direct labor	5,643 (570*0.9*$11)	2,970 (300*0.9*$11)
Variable overhead	570	300
Fixed overhead	1,710 (570*$3)	900 (300*$3)
Cost of goods sold	10,773	5,670
Budgeted Gross margin	5,187	2,730
Selling and administrative expenses:
Selling cost	1,277 (15,960*8%)	672 (8,400*8%)
Administrative expenses	1,700	1,700
Total selling and administrative expenses	2,977	2,372
Budgeted Net operating income	$2,210	$358