Shadee Corp. expects to sell 610 sun visors in May and 390 in June. Each visor s

Question

Shadee Corp. expects to sell 610 sun visors in May and 390 in June. Each visor sells for $20. Shadee’s beginning and ending finished goods inventories for May are 80 and 55 units, respectively. Ending finished goods inventory for June will be 60 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 $2.50 each. Shadee wants to have 34 closures on hand on May 1, 19 closures on May 31, and 28 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 $7 per hour. Required: 1. Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is $1.40.) (Round your answer to 2 decimal places.) 2. Compute the Shadee’s budgeted cost of goods sold for May and June. (Do not round your intermediate values. Use rounded cost per unit in intermediate calculations.)

Explanation / Answer

1. WN - production units

may = 610 +55 - 80 = 585

june= 390 + 60 - 55 = 395

2. cost of goods sold budget

cost per unit:

direct material cost may june production units 585 395 qty of raw material 1 closure 1 closure total 585 closure 395 closure add : closing qty 19 28 less: beginning qty 34 19 to be purchased 570 404 cost 2.50 2.50 total cost $1425 $ 1010 other direct material cost 1.5*585=877.5 1.5*395= 592.5 total direct material cost $2302.5 $ 1602.5

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