Requirements 1234 5. 6. 7. 8. Prepare a direct material usage budget in both units and dollars. Calculate the budgeted overhead allocation rates for weaving and dyeing. Calculate the budgeted unit cost of a blue rug for the year. Prepare a revenues budget for blue rugs for the year, assuming Xuan sells (a) 210,000 or (b) 190,000 blue rugs (that is, at two different sales levels). Calculate the budgeted cost of goods sold for blue rugs under each sales assumption. Find the budgeted gross margin for blue rugs under each sales assumption. What actions might you take as a manager to improve profitability if sales drop to 190,000 blue rugs? How might top management at Xuan use the budget developed in requirements 1-6 to better manage the company? Xuan Manufacturing Company manufactures blue rugs, using wool and dye as direct materials. One rug is budgeted to use 40 skeins of wool at a cost of $3 per skein and 0.7 gallons of dye at a cost of $7 per gallon. All other materials are indirect. At the beginning of the year Xuan has an inventory of 460,000 skeins of wool at a cost of $1,012,000 and 4,100 gallons of dye at a cost of $24,395. Target ending inventory of wool and dye is zero. Xuan uses the FIFO inventory cost flow method. (Click the icon to view the additional information.) There is no direct manufacturing labor cost for dyeing. Xuan budgets 70 direct manufacturing labor-hours to weave a rug at a budgeted rate of $14 per hour. It budgets 0.3 machine-hours to dye each skein in the dyeing process. (Click the icon to view the budgeted overhead costs.) Read the requirements. Data table Variable costs Indirect materials Maintenance Utilities Dyeing Weaving (based on 2,520,000 MH) (based on 14,700,000 DMLH) 0 $ 6,570,000 7,560,000 15,450,000 5,550,000 4,960,000 Fixed costs Indirect labor 355,000 1,755,000 Depreciation 2,168,000 275,000 Other 735,000 5,820,000 Total budgeted costs 17,388,000 $ 33,810,000