Xu Manufacturing Company manufachures blue nugs, using wool and dye as direct materials. One nug is budgeted to use 35 skeins of wool at a cost of $6 per skein and 0.8 galons of dye at a cost of $10 per gallon. All ofher indirect. At the beginning of the year Xu has an inventory of 406,000 skeins of wool at a cOst of $1,165,000 and 4,400 galons of dye at a cost of $27,280. Target ending inventory of wool and dye is zero. Xu uses the FIFO inventory cost flow method (Click the icon to view the additional information) There is no drect manufacturing labor cost for dysing Xu budgets 50 direct manufacturing labor-hours to weave a rug at a budgeted rate of $17 per hour. it budgets 0.2 machine-hours to dye each skein in the dyeing process (Cick the loon to view the budgeted overhead costs) rials are Read the requirements Requirement 1. Prepare a direct material usage budget in both units and dollars Degin 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 Material Wool Dye Total Physical Units Budget Direct materials required for Blue rugs skeins Cost Budget Available from beginning direct materials inventorys (under a FIFO cost-fow assumption) Wool Dye To be purchased this period Wool Dye Direct materials to be used tis period Choose from any ist or enter any number in the input Selds and then continue to the next question. X iMore Info Xu blue rugs are very popular and demand is high, but because of capacity constraints the firm will produce only 240,000 blue rugs per year. The budgeted selling price is $2,400 each. There are no rugs in beginning inventory. Target ending inventory of rugs is also zero Xu makes rugs by hand, but uses a machine to dye the wool. Thus, overhead costs are accumulated in two cost pools-one for weaving and the other for dyeing. Weaving overhead is allocated to products based on direct manufacturing labor-hours (DMLH). Dyeing overhead is allocated to products based on machine-hours (MH) Print Done 000 skeins of wool at a cost budgeted rate of $17 per hour. It budgets 0.2 machine-hou a ool and dve is zero. Xu uses the FIFQ inventory cost flow Data Table i The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: Weaving Dyeing (based on 12,000,000 DMLH) (based on 1,680,000 MH) Variable costs 15,600,000 0 $ Indirect materials 5,580,000 6,600,000 Maintenance 4,370,000 7,590,000 Utilities Fixed costs 1,920,000 387,000 Indirect labor 290,000 2,216,000 Depreciation 5,840,000 763,000 Other 33,600,000 17,556,000 $ Total budgeted costs Done Print X i Requirements orti tity 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. Prepare a revenues budget for blue rugs for the year, assuming Xu sells (a) 240,000 or (b) 205,000 blue rugs (that is, at two different sales levels) Calculate the budgeted cost of goods sold for blue rugs under each sales 4. 5. assumption. S - 6 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 205,000 blue rugs? 7. 8. How might top management at Xu use the budget developed in requirements 1-6 to better manage the company? Print Done