Xavier 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 $5 per skein and 0.75 gallons of dye at a cost of $8 per gallon. All other materials are indirect. At the beginning of the year Xavier has an inventory of 452,000 skeins of wool at a cost of $949,200 and 3,600 gallons of dye at a cost of $22,320. Target ending inventory of wool and dye is zero. Xavier uses the FIFO inventory cost flow method. (Click the icon to view the additional information.) There is no direct manufacturing labor cost for dyeing. Xavier budgets 48 direct manufacturing labor-hours to weave a rug at a budgeted rate of $15 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.) 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 Physical Units Budget Direct materials required for Blue rugs Requirements 1. 2. 3. 4. Material Wool Dye Total 40 .75 skeins gal 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 Xavier sells (a) 250,000 or (b) 225,000 blue rugs (that is, at two different sales levels). Data table The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: 5. Calculate the budgeted cost of goods sold for blue rugs under each sales assumption. Variable costs 6. 7. 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 225,000 blue rugs? Indirect materials $ 8. How might top management at Xavier use the budget developed in requirements 1-6 to better manage the company? Maintenance Utilities Fixed costs Indirect labor Depreciation Print Done Dyeing (based on 2,500,000 MH) Weaving (based on 12,000,000 DMLH) 0 $ 6,570,000 7,575,000 15,450,000 5,530,000 2,365,000 372,000 1,740,000 2,245,000 738,000 275,000 5,840,000 Other $ 17,500,000 $ 31,200,000 Total budgeted costs -