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 $5 per skein and 0.7 gallons of dye at a cost of $9 per gallon. All other materials are indirect. At the beginning of the year Xuan has an inventory of 464,000 skeins of wool at a cost of $1,113,600 and 4,300 gallons of dye at a cost of $26,230. Target ending inventory of wool and dye is zero. Xuan uses the FIFO inventory cost flow method. Xuan blue rugs are very popular and demand is high, but because of capacity constraints the firm will produce only 230,000 blue rugs per year. The budgeted selling price is $2,300 each. There are no rugs in beginning inventory. Target ending inventory of rugs is also zero. Xuan 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). There is no direct manufacturing labor cost for dyeing. Xuan budgets 60 direct manufacturing labor-hours to weave a rug at a budgeted rate of $16 per hour. It budgets 0.3 machine-hours to dye each skein in the dyeing process. The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: Dyeing (based on 2,760,000 MH) Weaving (based on 13,800,000 DMLH) Variable costs Indirect materials A 0 $ 15,550,000 5,570,000 Maintenance 6,590,000 Utilities 7,580,000 1,255,000 Fixed costs Indirect labor 1,865,000 Depreciation 380,000 2,226,000 750,000 285,000 5,835,000 Other 17,526,000 $ 30,360,000 Total budgeted costs Requirement 5. Calculate the budgeted cost of goods sold for blue rugs under each sales assumption. (For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.) Begin by (a) completing the cost of goods sold budget assuming sales of 230,000 rugs, and then (b) complete a cost of goods sold budget assuming sales of 200,000 rugs Cost of Goods Sold Budget (a) 230,000 units Beginning finished goods inventory Direct materials used Direct manufacturing labor Manufacturing overhead Cost of goods manufactured Cost of goods available for sale Deduct ending finished goods inventory Cost of goods sold 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 200,000 blue rugs? How might top management at Xuan use the budget developed in requirements 1-6 to better manage the company