Question

XiaoXiao

Manufacturing Company manufactures blue​ rugs, using wool and dye as direct materials. One rug is budgeted to use

3535

skeins of wool at a cost of

$ 6$6

per skein and

0.80.8

gallons of dye at a cost of

$ 10$10

per gallon. All other materials are indirect. At the beginning of the year

XiaoXiao

has an inventory of

466 comma 000466,000

skeins of wool at a cost of

$ 1 comma 165 comma 000$1,165,000

and

4 comma 4004,400

gallons of dye at a cost of

$ 27 comma 280$27,280.

Target ending inventory of wool and dye is zero.

XiaoXiao

uses the FIFO inventory cost flow method.

budgets

5050

direct manufacturing​ labor-hours to weave a rug at a budgeted rate of

$ 17$17

per hour. It budgets

0.20.2

​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	Weaving
	(based on 1,680,000 MH)	(based on 12,000,000 DMLH)
Variable costs
Indirect materials	$0	$15,600,000
Maintenance	6,600,000	5,580,000
Utilities	7,590,000	4,370,000
Fixed costs
Indirect labor	387,000	1,920,000
Depreciation	2,216,000	290,000
Other	763,000	5,840,000
Total budgeted costs	$17,556,000	$33,600,000

.

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
	Material
	Wool		Dye		Total
Physical Units Budget
Direct materials required for
Blue rugs		skeins		gal

Cost Budget
Available from beginning direct materials inventory
(under a FIFO cost-flow assumption)
Wool
Dye
To be purchased this period
Wool
Dye
Direct materials to be used this period

Requirement 2. Calculate the budgeted overhead allocation rates for weaving and dyeing.

Begin by determining the​ formula, then calculate the budgeted overhead allocation rate for weaving. ​(Round your answer to the nearest​ cent.)

	/		=	Budgeted manufacturing overhead rate
	/		=

Begin by determining the​ formula, then calculate the budgeted overhead allocation rate for dyeing. ​(Round your answer to the nearest​ cent.)

	/		=	Budgeted manufacturing overhead rate
	/		=

Requirement 3. Calculate the budgeted unit cost of a blue rug for the year. ​(Round your answers to two decimal​ places.)

	Cost per		Input per		Budgeted
	unit of input	x	unit of output	=	unit cost
Wool		x		=
Dye		x		=
Direct manufacturing labor		x		=
Dyeing overhead		x		=
Weaving overhead		x		=
Total

Requirement 4. Calculate the budgeted cost of goods sold for blue rugs assuming sales of

240 comma 000240,000

rugs​(For

amounts with a​ $0 balance, make sure to enter​ "0" in the appropriate ​cell.)

Cost of Goods Sold Budget
	(a) 240,000	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

Answer 1

1	Direct material usage budget in quantity and dollars:
					Material
					Wool	Dye	Total
	Physical units budget:
	Direct materials required for Blue rugs				8400000	192000
					(240000*35)	(240000*0.8)
					Skeins	gal
	Cost budget:
	Available from beginning direct materials
	inventory			a
	Wool	466000	Skeins		1165000
	Dye	4400	gal			27280
	To be purchased this period			b
	Wool	(8400000-466000)*6			47604000
	Dye	(192000-4400)*0.8				150080
	Direct materials to be used this period			a+b	48769000	177360	48946360
2	Budgeted overhead allocation rates:
	Dyeing:
	Budgeted manufacturing overhead rate=Total budgeted cost/Estimated machine hours=17556000/1680000=$ 10.45 per machine hour
	Weaving:
	Budgeted manufacturing overhead rate=Total budgeted cost/Estimated DMLH=33600000/12000000=$ 2.80 per DMLH
3	Budgeted unit cost:
					Cost per unit of input	*	Input per unit of output	=	Budgeted unit cost
	Wool				6		35		210
	Dye				10		0.8		8
	Direct manufacturing labor				17		50		850
	Dyeing overhead				10.45		7		73.15
							(Note:1)
	Weaving overhead				2.8		50		140
	Total								1281.15
	Note:1
	Machine hours per unit=Machine hours per skein*Skein required per unit=0.2*35=7 hours
4	Cost of goods sold budget:
					$	$
	Beginning finished goods inventory					0
	Direct materials used				48946360
	Direct manufacturing labor			(240000*850)	204000000
	Manufacturing overhead
	Dyeing overhead			(240000*73.15)	17556000
	Weaving overhead			(240000*140)	33600000
	Cost of goods manufactured					304102360
	Cost of goods available for sale					304102360
	Deduct ending finished goods inventory					0
	Cost of goods sold					304102360
	Note:
	It is assumed that all units produced are sold.Hence,
	Beginning and finished goods inventory is 0