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Xin Mlanufacturing Company manufactures blue rugs using wool and dye as direct materials. One rug is budgeted to use 38 skeins of wool at a cost of $7 per skein and 0.7 gallons of dye at a cost of $5 per gallon. All other makerials are indirect. At the beginning of the year, Xin has an inventory of 456,000 skeins of wool at a cost of $1,048,800 and 3,400 gallons of dye at a cost of $21,760. Target ending inventory of wool and dye is zero. Xin uses the FIFO inventory cost flow method. (2) (Click the icon to view the additional information) It budgets 0.3 machine-hours to dye each skein in the dyeing process. There is no direct manulacturing labor cost for dyeing. Xin budgets 48 direct manufacturing labor-hours to weave a rug at a budgeted rate of $17 per hour. 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 malerial usage budgot. Direct Material Usage Budget in Quantity and Doltars More info Xin blue rugs are very popular and demand is high, but because of capacity constraints the firm will produce only 275,000 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. Xin 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). Data table The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: Data table Requirements 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 Xin sells (a) 275,000 or (b) 255,000 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 255,000 blue rugs? 8. How might top management at Xin use the budget developed in requirements 16 to better manage the company

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