How were 6,080,000 skeins and 142,500 gal calculated please?
| 1. | Prepare a direct material usage budget in both units and dollars. | | 2. | Calculate the budgeted overhead allocation rates for weaving and dyeing. | | 3. | Calculate the budgeted unit cost of a blue rug for the year. | | 4. | Prepare a revenues budget for blue rugs for the year, assuming Xuereb sells (a) 275,000 or (b) 255,000 blue rugs (that is, at two different sales levels). | | 5. | Calculate the budgeted cost of goods sold for blue rugs under each sales assumption. | | 6. | Find the budgeted gross margin for blue rugs under each sales assumption. | | 7. | What actions might you take as a manager to improve profitability if sales drop to 255,000 blue rugs? | | 8. | How might top management at Xuereb use the budget developed in requirements 1-6 to better manage the company? | | |
Xenos Manufacturing Company manufactures blue rugs using wool and dye as direct materials. One rug is budgeted to use 32 skeins of wool at a cost of $2 per skein and 0.75 gallons of dye at a cost of $5 per gallon. All other materials are indirect. At the beginning of the year, Xenos has an inventory of 446,000 skeins of wool at a cost of $802,800 and 3,900 gallons of dye at a cost of $22,620. Target ending inventory of wool and dye is zero. Xenos uses the FIFO inventory cost flow method. (Click the icon to view the additional information.) It budgets 0.25 machine-hours to dye each skein in the dyeing process. There is no direct manufacturing labor cost for dyeing. Xenos budgets 70 direct manufacturing labor-hours to weave a rug at a budgeted rate of $12 per hour. (Click the icon to view the budgeted overhead costs.) Read the requirements Material Wool Dye Total Physical Units Budget Direct materials required for 6,080,000 Blue rugs 142,500 skeins gal Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) Wool Dye To be purchased this period III III Wool Dye Direct materials to be used this period The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: Dyeing (based on 1,520,000 MH) Weaving (based on 13,300,000 DMLH) Variable costs $ 0 $ Indirect materials Maintenance Utilities Fixed costs 6,550,000 7,540,000 15,350,000 5,530,000 3,300,000 Indirect labor Depreciation Other 337,000 2,112,000 713,000 1,665,000 260,000 5,815,000 $ 17,252,000 $ 31,920,000 Total budgeted costs
