=+10-21 KK Budgeting: direct materials usage, manufacturing cost and gross margin OBJECTIVE 3 Woolmark Manufacturing Ltd manufactures blue rugs, using wool and dye as direct materials. One blue rug is budgeted to use 36 skeins of wool at a cost of $2 per skein and 0.8 litres of dye at a cost of $6 per litre. All other materials are indirect. At the beginning of the year Woolmark Manufacturing has an inventory of 458000 skeins of wool at a cost of $961800 and 4000 litres of dye at a cost of $23680. Target ending inventory of wool and dye is zero. Woolmark Manufacturing uses the FIFO inventory cost flow method.