XueXue Manufacturing Company manufactures blue? rugs, using wool and dye as dire
ID: 2558406 • Letter: X
Question
XueXue
Manufacturing Company manufactures blue? rugs, using wool and dye as direct materials. One rug is budgeted to use
4040
skeins of wool at a cost of
$ 5$5
per skein and
0.70.7
gallons of dye at a cost of
$ 9$9
per gallon. All other materials are indirect. At the beginning of the year
XueXue
has an inventory of
464 comma 000464,000
skeins of wool at a cost of
$ 1 comma 113 comma 600$1,113,600
and
4 comma 3004,300
gallons of dye at a cost of
$ 26 comma 230$26,230.
Target ending inventory of wool and dye is zero.
XueXue
uses the FIFO inventory cost flow method.
blue rugs are very popular and demand is? high, but because of capacity constraints the firm will produce only
230 comma 000230,000
blue rugs per year. The budgeted selling price is
$ 2 comma 300$2,300
each. There are no rugs in beginning inventory. Target ending inventory of rugs is also zero.
XueXue
makes rugs by? hand, but uses a machine to dye the wool.? Thus, overhead costs are accumulated in two cost
poolslong dash—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.
XueXue
budgets
6060
direct manufacturing? labor-hours to weave a rug at a budgeted rate of
$ 16$16
per hour. It budgets
0.30.3
?machine-hours to dye each skein in the dyeing process.
There is no direct manufacturing labor cost for dyeing.
XueXue
budgets
6060
direct manufacturing? labor-hours to weave a rug at a budgeted rate of
$ 16$16
per hour. It budgets
0.30.3
?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
Weaving
(based on 2,760,000 MH)
(based on 13,800,000 DMLH)
Variable costs
Indirect materials
$0
$15,550,000
Maintenance
6,590,000
5,570,000
Utilities
7,580,000
1,255,000
Fixed costs
Indirect labor
380,000
1,865,000
Depreciation
2,226,000
285,000
Other
750,000
5,835,000
Total budgeted costs
$17,526,000
$30,360,000
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.
4.
XueXue
230 comma 000230,000
200 comma 000200,000
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.
200 comma 000200,000
8.
XueXue
The following table presents the budgeted overhead costs for the dyeing and weaving cost pools:
Dyeing
Weaving
(based on 2,760,000 MH)
(based on 13,800,000 DMLH)
Variable costs
Indirect materials
$0
$15,550,000
Maintenance
6,590,000
5,570,000
Utilities
7,580,000
1,255,000
Fixed costs
Indirect labor
380,000
1,865,000
Depreciation
2,226,000
285,000
Other
750,000
5,835,000
Total budgeted costs
$17,526,000
$30,360,000
Explanation / Answer
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1. Direct Material usage Wool Dye Total Blue Rugs being Produced 230000 For One Blue Rug, Material Needed 40 0.7 Total Direct Material Usage 230000*40 230000*0.7 9200000 161000 In Dollars: Wool $ DYE $ Total Beginning Inventory A: 464000 Skiens 1113600 4300 Gallons 26230 To be purchased B: (9200000-464000)*5 43680000 (161000-4300)*9 1410300 Direct Material usage ($) A+B 44793600 1436530 46230130 2. Budgeted Overhead Allocation Rates: Weaving Dying Budgeted Overhead 30360000 17526000 Machine Hours 2760000 Labor Hours 13800000 Budgeted Overhead Allocation Rates Ovh/Hour 2.2 6.35 3. Budgeted Unit cost of Rug: Cost per unit of Input Input per unit of Output Total Wool 5 40 200 Dye 9 0.7 6.3 Direct Manu Labor 16 60 960 Dyeing Overhead* 6.35 12 76.2 Weaving Overhead 2.2 60 132 Total 1374.5 Dyeing Overhead: 0.3 Machine Hour per skein*40 Skein 4. Revenue Budget Units Selling Price Total Revenue Budget 230000 2300 529000000 200000 2300 460000000 5. COGS Sale 230000 Sale 200000 Beginning Finished Goods 0 0 Direct Material (From -1) 46230130 46230130 Direct Manufacturing (230000*960) 220800000 220800000 Dying Overhead (230000*76.2) 17526000 17526000 Weaving Overhead (230000*132) 30360000 30360000 Cost of Goods Availabel for Sale 314916130 314916130 Less: Ending Finished Goods (30000*1374.5) 40935000 Cost of Goods Sold 314916130 273981130 6. Gross Margin Sale 230000 Sale 200000 Revenue 529000000 460000000 Less: COGS 314916130 273981130 Gross Margin 214083870 186018870 7. Should attempt to reduce Fixed cost and to produce less to reduce variable cost and hence inventory cost 8. Should attempt to find out ways to increase sale and imporve quality.Related Questions
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