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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 $1.50 each. Shadee wants to have 30 closures on hand on May 1, 20 closures on May 31, and 25 closures on June 30 and variable manufacturing overhead is $1.25 per unit produced. Suppose that each visor takes 0.30 direct labor hours to produce and Shadee pays its workers $9 per hour. Required: 1. Determine Shadee’s budgeted manufacturing cost per visor. (Note: Assume that fixed overhead per unit is $2.) 2. Determine Shadee's budgeted cost of goods sold for May and June.

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Answer:

Part  1. Determine Shadee’s budgeted manufacturing cost per visor.

Direct Materials                                    4.00

Variable Manufacturing Overhead      1.25

Direct Labor (0.30 hours×$9.00)         2.70

Fixed Manufacturing Overhead          2.00

Budgeted manufacturing cost             9.95

Therefore Shadee’s budgeted manufacturing cost per visor is $9.95

Part 2. Determine Shadee's budgeted cost of goods sold for May and June.

                                                                             May              June

Opening Stock of Finished Goods                     0                      0

Add Manufacturing Cost of Finished Goods    9.95                9.95

Less Closing Stock of Finished Goods               0                     0

Cost of Goods Sold                                             9.95               9.95

Explanation:

Part  1. Determine Shadee’s budgeted manufacturing cost per visor.

Manufacturing cost per visor = Direct Material+Direct labor+Manufacturing Overhead (variable +fixed)

Part 2. Determine Shadee's budgeted cost of goods sold for May and June.

Cost of goods sold = Opening Stock of finished goods + cost of finished goods manufactured-closing stock of finished goods

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