Xuereb 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 0.8 gallons of dye at a cost of $10 per gallon. All other materials are indirect. At the beginning of the year Xuereb has an inventory of 466,000 skeins of wool at a cost of $1,165,000 and 4,400 gallons of dye at a cost of $27,280. Target ending inventory of wool and dye is zero. Xuereb uses the FIFO inventory cost flow method. O (Click the icon to view the additional information.) There is no direct manufacturing labor cost for dyeing. Xuereb 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. E (Click the icon to view the budgeted overhead costs.) Read the requirements 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. More Info Direct Material Usage Budget in Quantity and Dollars Xuereb blue rugs are very popular and demand is high, but because 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. Material capacity constraints the firm will Wool Dye Total Physical Units Budget Xuereb 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). Direct materials required for Blue rugs skeins gal
Xuereb 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 0.8 gallons of dye at a cost of $10 per gallon. All other materials are indirect. At the beginning of the year Xuereb has an inventory of 466,000 skeins of wool at a cost of $1,165,000 and 4,400 gallons of dye at a cost of $27,280. Target ending inventory of wool and dye is zero. Xuereb uses the FIFO inventory cost flow method. O (Click the icon to view the additional information.) There is no direct manufacturing labor cost for dyeing. Xuereb 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. E (Click the icon to view the budgeted overhead costs.) Read the requirements 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. More Info Direct Material Usage Budget in Quantity and Dollars Xuereb blue rugs are very popular and demand is high, but because 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. Material capacity constraints the firm will Wool Dye Total Physical Units Budget Xuereb 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). Direct materials required for Blue rugs skeins gal
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Xuereb 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 0.8 gallons of dye at a cost of $10 per gallon. All other materials are indirect. At
the beginning of the year Xuereb has an inventory of 466,000 skeins of wool at a cost of $1,165,000 and 4,400 gallons of dye at
a cost of $27,280. Target ending inventory of wool and dye is zero. Xuereb uses the FIFO inventory cost flow method.
A (Click the icon to view the additional information.)
There is no direct manufacturing labor cost for dyeing. Xuereb 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.
E (Click the icon to view the budgeted overhead costs.)
Read the requirements.
Requirement 1. Prepare a direct material usage budget in both units and dollars.
More Info
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
Xuereb 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 $2,400 each. There are no rugs in
beginning inventory. Target ending inventory of rugs is also zero.
Material
Wool
Dye
Total
Physical Units Budget
Xuereb makes rugs by hand, but uses a machine to dye the wool. Thus, overhead costs are accumulated
in two cost pools-one for weaving and the other for dyeing. Weaving overhead is allocated to products
based on direct manufacturing labor-hours (DMLH). Dyeing overhead is allocated to products based on
machine-hours (MH).
Direct materials required for
Blue rugs
skeins
gal
Print
Done
Transcribed Image Text:- X
Data Table
veave a rug at
Requirements
The following table presents the budgeted overhead costs for the dyeing and weaving cost pools:
1. Prepare a direct material usage budget in both units and dollars.
2.
Calculate the budgeted overhead allocation rates for weaving and dyeing.
Dyeing
Weaving
3.
Calculate the budgeted unit cost of a blue rug for the year.
4.
(based on 12,000,000 DMLH)
Prepare a revenues budget for blue rugs for the year, assuming Xuereb sells (a)
240,000 or (b) 205,000 blue rugs (that is, at two different sales levels).
(based on 1,680,000 MH)
Variable costs
5. Calculate the budgeted cost of goods sold for blue rugs under each sales
assumption.
Indirect materials
2$
Os
15,600,000
6. Find the budgeted gross margin for blue rugs under each sales assumption.
Maintenance
6,600,000
5,580,000
7. What actions might you take as a manager to improve profitability if sales drop to
205,000 blue rugs?
Utilities
7,590,000
4,370,000
8.
How might top management at Xuereb use the budget developed in requirements
1-6 to better manage the company?
Fixed costs
Indirect labor
387,000
1,920,000
Depreciation
2,216,000
290,000
763,000
5,840,000
Other
17.556.000 $
33,600,000
Print
Done
Total budgeted costs
Print
Done
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