Xavier Manufacturing Company manufactures blue rugs using wool and dye as direct materials. One rug is budgeted to use $35$ skeins of wool at a cost of $ $6$ per skein and $0\mathrm{.}8$ gallons of dye at a cost of $ $10$ per gallon. All other materials are indirect. At the beginning of the$$ year, Xavier has an inventory of $466000$ skeins of wool at a cost of $ $1165000$ and $4400$ gallons of dye at a cost of $ $27280.$ Target ending inventory of wool and dye is zero. Xavier uses the FIFO inventory cost flow method. It budgets $0\mathrm{.}2$machine$-$hours to dye each skein in the dyeing process. There is no direct manufacturing labor cost for dyeing. Xavier budgets $50$ direct manufacturing$$ labor$-$hours to weave a rug at a budgeted rate of $ $17$ per hour. Xavier blue rugs are very popular and demand is$$ high, but because of capacity constraints the firm will produce only $240000$ blue rugs per year. The budgeted selling price is $ $2400$ each. There are no rugs in beginning inventory. Target ending inventory of rugs is also zero.

Xavier makes rugs by$$ hand, but uses a machine to dye the wool.$$ Thus, overhead costs are accumulated in two cost poolslong dashone 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$).1.$

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$$ year, assuming Xavier sells$($a$)240000$ or$($b$)205000$ blue rugs$($that is$,$ at two different sales$$ 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 $205000$ blue$$ rugs?

$8.$ How might top management at Xavier use the budget developed in requirements$1-6$ to better manage the$$ company?