Question

Shadee Corporation expects to sell 600 sun shades in May and 400 in June. Each shade sells for $146. Shadee’s beginning and ending finished goods inventories for May are 80 and 55 shades, respectively. Ending finished goods inventory for June will be 65 shades. Suppose that each shade takes three direct labor hour to produce and Shadee pays its workers $14 per hour. Additionally, Shadee’s fixed manufacturing overhead is $9,000 per month, and variable manufacturing overhead is $10 per unit produced. Required: Prepare Shadee’s direct labor budget for May and June. Prepare Shadee’s manufacturing overhead budget for May and June.

Answer 1

To prepare Shadee Corporation's direct labor budget, calculate the total labor cost for May and June. For the manufacturing overhead budget, consider fixed and variable overhead costs for both months.

Step-by-step explanation:

To prepare Shadee Corporation's direct labor budget for May, we need to calculate the total direct labor cost for producing the 600 sun shades. Each shade takes 3 direct labor hours, and workers are paid $14 per hour, so the total direct labor cost for May is 600 * 3 * $14 = $25,200.

In June, Shadee Corporation expects to sell 400 sun shades. Using the same calculation, the total direct labor cost for June would be 400 * 3 * $14 = $16,800.

To prepare Shadee Corporation's manufacturing overhead budget, we need to consider both fixed and variable manufacturing overhead.

For May, the fixed manufacturing overhead is $9,000 per month. The variable manufacturing overhead is $10 per unit produced, so the total variable manufacturing overhead for May is 600 * $10 = $6,000. The total manufacturing overhead for May is $9,000 + $6,000 = $15,000.

In June, the fixed manufacturing overhead and ending finished goods inventory remain the same as May. The variable manufacturing overhead is calculated based on the 400 units produced in June, so the total variable manufacturing overhead for June is 400 * $10 = $4,000. The total manufacturing overhead for June is $9,000 + $4,000 = $13,000.