Question

Shadee Corporation expects to sell 530 sun shades in May and 310 in June. Each shade sells for $144. Shadee’s beginning and ending finished goods inventories for May are 75 and 50 shades, respectively. Ending finished goods inventory for June will be 50 shades.

Each shade requires a total of $55.00 in direct materials that includes 4 adjustable poles that cost $5.00 each. Shadee expects to have 120 in direct materials inventory on May 1, 80 poles in inventory on May 31, and 100 poles in inventory on June 30.
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 $10,000 per month, and variable manufacturing overhead is $11 per unit produced.

Additional information:
-Selling costs are expected to be 7 percent of sales.
-Fixed administrative expenses per month total $1,200.
Prepare Shadee’s budgeted income statement for the months of May and June.

Answer 1

To prepare Shadee Corporation's budgeted income statement for May and June, we need to calculate the relevant costs and expenses for each month and determine the total revenue. The budgeted income statement for May is as follows: Sales Revenue: $76,320, Cost of Goods Sold: $50,340, Gross Profit: $25,980, Operating Expenses: $6,542.40, Net Income: $19,437.60. Follow the same steps to calculate the budgeted income statement for June using the given information.

Step-by-step explanation:

To prepare Shadee Corporation's budgeted income statement for May and June, we need to calculate the relevant costs and expenses for each month and determine the total revenue.

1. First, calculate the cost of direct materials for each month. In May, 530 shades will be produced, and each shade requires $55.00 in direct materials, including 4 adjustable poles that cost $5.00 each. Therefore, the direct materials cost for May is $55.00 x 530 = $29,150.
2. Next, calculate the total direct labor cost for each month. Each shade takes three direct labor hours to produce, and Shadee pays its workers $14 per hour. In May, 530 shades will be produced, so the total direct labor cost for May is $14.00 x 3 x 530 = $22,260.
3. Then, determine the variable manufacturing overhead cost for each month. Shadee's variable manufacturing overhead is $11 per unit produced. In May, 530 shades will be produced, so the variable manufacturing overhead cost for May is $11.00 x 530 = $5,830.
4. Next, calculate the fixed manufacturing overhead cost for each month. Shadee's fixed manufacturing overhead is $10,000 per month.
5. Calculate the selling expenses for each month. The selling cost is expected to be 7 percent of sales. In May, the sales revenue can be calculated by multiplying the number of shares sold (530) by the selling price ($144). The sales revenue for May is $144.00 x 530 = $76,320. Therefore, the selling expenses for May are 7% x $76,320 = $5,342.40.
6. Calculate the total cost of goods sold for each month. To calculate the cost of goods sold, we need to take into account the beginning and ending finished goods inventories. In May, the beginning finished goods inventory is 75 shades, the production is 530 shades, and the ending finished goods inventory is 50 shades. Therefore, the cost of goods sold for May is ($29,150 + $22,260 + $5,830 + $10,000) - [(75 + 530) - 50] x $144 = $50,340.
7. Calculate the total gross profit for each month. Gross profit is equal to the sales revenue minus the cost of goods sold. In May, the gross profit is $76,320 - $50,340 = $25,980.
8. Lastly, calculate the total operating expenses for each month. The operating expenses consist of fixed administrative expenses and selling expenses. The fixed administrative expenses are $1,200 per month, and the selling expenses for May are $5,342.40. Therefore, the total operating expenses for May are $1,200 + $5,342.40 = $6,542.40.

May Budgeted Income Statement:

AmountSales Revenue$76,320Cost of Goods Sold$50,340Gross Profit$25,980Operating Expenses$6,542.40Net Income$19,437.60

Follow the same steps to calculate the budgeted income statement for June, using the given information.