Data table

The following table presents the budgeted overhead costs for the dyeing and weaving cost pools:
	Dyeing	Weaving
	(based on 3,135,000 MH)	(based on 13,200,000 DMLH)
Variable costs
Indirect materials	$0	$15,510,000
Maintenance	6,590,000	5,540,000
Utilities	7,595,000	2,705,000
Fixed costs
Indirect labor	392,000	1,760,000
Depreciation	2,221,000	285,000
Other	758,000	5,880,000
Total budgeted costs	$17,556,000	$31,680,000

More info

Xiao

blue rugs are very popular and demand is high, but because of capacity constraints the firm will produce only

275,000

blue rugs per year. The budgeted selling price is

$2,400

each. There are no rugs in beginning inventory. Target ending inventory of rugs is also zero.

Xiao

makes rugs by hand, but uses a machine to dye the wool. Thus, overhead costs are accumulated in two cost

poolsone

for dyeing and the other for weaving. Dyeing overhead is allocated to products based on machine-hours (MH). Weaving overhead is allocated to products based on direct manufacturing labor-hours (DMLH).

Xiao

Manufacturing Company manufactures blue rugs using wool and dye as direct materials. One rug is budgeted to use

38

skeins of wool at a cost of

$7

per skein and

0.7

gallons of dye at a cost of

$5

per gallon. All other materials are indirect. At the beginning of the year,

Xiao

has an inventory of

456,000

skeins of wool at a cost of

$1,048,800

and

3,400

gallons of dye at a cost of

$21,760.

Target ending inventory of wool and dye is zero.

Xiao

uses the FIFO

It budgets

0.3

machine-hours to dye each skein in the dyeing process. There is no direct manufacturing labor cost for dyeing.

Xiao

budgets

48

direct manufacturing labor-hours to weave a rug at a budgeted rate of

$17

per hour

Data table

The following table presents the budgeted overhead costs for the dyeing and weaving cost pools:
	Dyeing	Weaving
	(based on 3,135,000 MH)	(based on 13,200,000 DMLH)
Variable costs
Indirect materials	$0	$15,510,000
Maintenance	6,590,000	5,540,000
Utilities	7,595,000	2,705,000
Fixed costs
Indirect labor	392,000	1,760,000
Depreciation	2,221,000	285,000
Other	758,000	5,880,000
Total budgeted costs	$17,556,000	$31,680,000

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Requirement 1. Prepare a direct material usage budget in both units and dollars.

Begin with the physical units portion, then prepare the cost budget portion of the direct material usage budget.

Direct Material Usage Budget in Quantity and Dollars
	Material
	Wool	Dye	Total
Physical Units Budget
Direct materials required for
Blue rugs		skeins		gal