Requirements
| 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 Xiao sells (a) 190,000 or (b) 180,000 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 180,000 blue rugs? |
| 8. | How might top management at Xiao use the budget developed in requirements 1-6 to better manage the company? |
Xiao 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 Xiao 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, Xiao uses the FIFO inventory cost flow method. (Click the icon to view the additional information.) There is no direct manufacturing labor cost for dyeing. Xiao budgets 70 direct manufacturing labor-hours to weave a rug at a budgeted rate of $12 per hour. It budgets 0.25 machine-hours to dye each skein in the dyeing process. (Click the icon to view the budgeted overhead costs.) Read the requirements, Direct Material Usage Budget in Quantity and Dollars Material Wool Dye Total Physical Units Budget Direct materials required for skeins gal Blue rugs Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) Wool Dye To be purchased this period Wool Dye S Direct materials to be used this period Requirement 2. Calculate the budgeted overhead allocation rates for weaving and dyeing. Begin by determining the formula, then calculate the budgeted overhead allocation rate for weaving. (Round your answer to the nearest cent.) = Budgeted manufacturing overhead rate = Begin by determining the formula, then calculate the budgeted overhead allocation rate for dyeing. (Round your answer to the nearest cent.) = Budgeted manufacturing overhead rate = Requirement 3. Calculate the budgeted unit cost of a blue rug for the year. (Round your answers to two decimal places.) Cost per Budgeted Input per unit of output unit of input = unit cost Wool X = x = Dye Direct manufacturing labor Dyeing overhead X Weaving overhead Requirement 4. Calculate the budgeted cost of goods sold for blue rugs assuming sales of 190,000 rugs(For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.) Cost of Goods Sold Budget (a) 190,000 units Beginning finished goods inventory Direct materials used Direct manufacturing labor Manufacturing overhead Cost of goods manufactured Cost of goods available for sale Deduct ending finished goods inventory Cost of goods sold M Xiao 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 Xiao 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, Xiao uses the FIFO inventory cost flow method. (Click the icon to view the additional information.) There is no direct manufacturing labor cost for dyeing. Xiao budgets 70 direct manufacturing labor-hours to weave a rug at a budgeted rate of $12 per hour. It budgets 0.25 machine-hours to dye each skein in the dyeing process. (Click the icon to view the budgeted overhead costs.) Read the requirements, Direct Material Usage Budget in Quantity and Dollars Material Wool Dye Total Physical Units Budget Direct materials required for skeins gal Blue rugs Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) Wool Dye To be purchased this period Wool Dye S Direct materials to be used this period Requirement 2. Calculate the budgeted overhead allocation rates for weaving and dyeing. Begin by determining the formula, then calculate the budgeted overhead allocation rate for weaving. (Round your answer to the nearest cent.) = Budgeted manufacturing overhead rate = Begin by determining the formula, then calculate the budgeted overhead allocation rate for dyeing. (Round your answer to the nearest cent.) = Budgeted manufacturing overhead rate = Requirement 3. Calculate the budgeted unit cost of a blue rug for the year. (Round your answers to two decimal places.) Cost per Budgeted Input per unit of output unit of input = unit cost Wool X = x = Dye Direct manufacturing labor Dyeing overhead X Weaving overhead Requirement 4. Calculate the budgeted cost of goods sold for blue rugs assuming sales of 190,000 rugs(For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.) Cost of Goods Sold Budget (a) 190,000 units Beginning finished goods inventory Direct materials used Direct manufacturing labor Manufacturing overhead Cost of goods manufactured Cost of goods available for sale Deduct ending finished goods inventory Cost of goods sold M
