Xander Manufacturing Company manufactures blue rugs (Click the icon to view the additional using wool and dye as direct materials. One rug is budgeted to use 36 skeins of wool at a cost of $2 per skein information.) and 0.8 gallons of dye at a cost of $6 per gallon. All other It budgets 0.2 machine-hours to dye each skein in materials are indirect. At the beginning of the year, Xander the dyeing process. There is no direct has an inventory of 458,000 skeins of wool at a cost of manufacturing labor cost for dyeing. Xander $961,800 and 4,000 gallons of dye at a cost of $23,680. budgets 62 direct manufacturing labor-hours to Target ending inventory of wool and dye is zero. Xander weave a rug at a budgeted rate of $13 per hour. uses the FIFO inventory cost flow method. (Click the icon to view the budgeted overhead costs.) Xander blue rugs are very popular and demand is high, but because of capacity constraints the firm will produce only 200,000 blue rugs per year. The budgeted selling price is $2,000 each. There are no rugs in beginning inventory. Target ending inventory of rugs is also zero. Xander makes rugs by hand, but uses a machine to dye the wool. Thus, overhead costs are accumulated in two cost pools-one 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). The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: 1. Prepare a direct material usage budget in both units and dollars. 2. Calculate the budgeted overhead allocation rates for dyeing and weaving. 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 Xander sells (a) 200,000 or (b) 185,000 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 185,000 blue rugs? 8. How might top management at Xander use the budget developed in requirements 1-6 to better manage the company? 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