Question

Exercise 6-17 (book/static) Question Help Covered Manufacturing Company manufactures (Click the icon to view the additional blue rugs, using wool and dye as direct materials. One rug is budgeted to use 30 skeins of wool at a information.) cost of $2 per skein and 0.5 litres of dye at a cost There is no direct manufacturing labour cost for of $5 per litre. All other materials are indirect. At the dyeing. Covered budgets 56 direct manufacturing beginning of the year Covered has an inventory of labour-hours to weave a rug at a budgeted rate of 349,000 skeins of wool at a cost of $715,450 and $15 per hour. It budgets 0.15 machine-hours to 5,000 litres of dye at a cost of $24.850. Target dye each skein in the dyeing process ending inventory of wool and dye is zero. Covered (Click the icon to view the budgeted overhead uses the FIFO inventory cost flow method. costs.) Required 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 Physical Units Budget Direct materials required for skeins blue rugs L Total

Answer 1

Ans.                                                  Direct material usage Budget in Units

                                                                 Wool                        Dye

Units used in production of Blue rug

Wool (100000X30) 3000000    -   

Dye (100000X.50)                                       -                          50000

Op. inventory    349000 5000

Closing inventory - -

Purchase during the year    2651000    45000

Material usage budget for wool = 3000000 skeins

Material usage budget for dye = 50000 litres

                                                                Material usage budget in dollars

                                                                   Wool                 Dye

Begning inventory cost                                 715450                  24850

Purchase cost

wool (300000-349000)*2                              5302000     -

dye (50000-5000)*5                                       -                           225000

Total material usage budgetd cost       6017450    249850