Shadee Corp. expects to sell 520 sun visors in May and 310 in June. Each visor s

Question

Shadee Corp. expects to sell 520 sun visors in May and 310 in June. Each visor sells for $26. Shadee’s beginning and ending finished goods inventories for May are 60 and 60 units, respectively. Ending finished goods inventory for June will be 70 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 $1.50 each. Shadee wants to have 26 closures on hand on May 1, 21 closures on May 31, and 27 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 $12 per hour.        

Additional information:

Selling costs are expected to be 6 percent of sales.

Fixed administrative expenses per month total $1,500.

Required:
Complete Shadee's budgeted income statement for the months of May and June. (Note: Assume that fixed overhead per unit is $1.80.) (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

Budget Income Statement:

Explanation / Answer

Cost of goods Cost per unit Direct materials $5.00 Direct labor $8.40 (12*0.7) Variable manufactuting OH $1.75 Total variable cost per unit $15.15 A May beginning inventory            60.00 units B Ending inventory            60.00 units C Sales 520 units D=C+B-A Production quantity in May 520 units E June beginning inventory 60 units F Ending inventory 70 units G Sales 310 units G+F-E Production quantity in June 320 units H=D+G Total production in may and june 840 units I=H*1.8 Total fixed costs in May & June $        1,512 J=I/2 Fixed costs per month $            756 May June K Units sold 520 310 L=k*15.15 Total variable costs $ 7,878.00 $ 4,696.50 M Fixed costs $756 $756 N Cost of goods sold $ 8,634.00 $ 5,452.50 BUDGETED INCOME STATEMENT May June P Sales Revenue $      13,520 $        8,060 (May sales=520*26, June sales=310*26) Q Cost of goods sold $ 8,634.00 $ 5,452.50 R=P-Q Gross Profit $ 4,886.00 $ 2,607.50 S=0.06*P Selling Cost $      811.20 $     483.60 T Fixed administrative expense $1,500 $1,500 U=R-S-T Net Income $ 2,574.80 $     623.90

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