Question

Xiao Manufacturing Company manufactures blue rugs, using wool and dye as direct materials. One rug is budgeted to use 40 skeins of wool at a cost of $5 per skein and 0.75 gallons of dye at a cost of $8 per gallon. All other materials are indirect. At the beginning of the year Xiao has an inventory of 452,000 skeins of wool at a cost of $949,200 and 3,600 gallons of dye at a cost of $22,320. Target ending inventory of wool and dye is zero. Xiao uses the FIFO inventory cost flow method.

Drop down options: Direct manuf. labor , Direct manuf labor hours , Direct materials , Machine hours, Output units produced , Total budgeted overhead costs

Drop down option Requirement 7: increase or reduce

Drop down option Requirement 8:

coordinate and communicate across different parts of the organization

create a framework for judging performance

look for ways to increase sales and improve quality, efficiency and input prices.

look for ways to improve quality and efficiency while also increasing input prices

motivate managers and employees to increase inventory and achieve higher costs.

Answer 1

Requirement 1

Direct Material Usage Budget in Quantity and Dollars
			Material
	Physical Units Budget	Budgeted Qty	Wool in Skiens/Rug	Dye in Gallons
a)	Direct Material requried for Blue Rugs in qty/unit	250000	40	0.75
	Direct Material requried for Blue Rugs Total in qty		10,000,000	187,500
	Cost Budget
b)	Available from begnning direct materials inventory in units
	Wool		452,000
	Dye			3,600
c)	To be purchased for this period
	Wool		9,548,000
	Dye			183,900
	Budgted cost per unit in $		5	8
d)	Total Budged Cost of		$47,740,000	$1,471,200
e)	Cost of opening stock of Material		$949,200	$22,320
	Direct Material to be used this period in		$48,689,200	$41,493,520

Requirement 2
Budgeted manufacturing overhead rate For Weaving
Budgeted Overhead cost /Budgeted Direct labour hours	31200000/12000000
Weaving overhead rate	$2.6/hour
Budgeted manufacturing overhead rate For Dyeing
Budgeted Overhead cost /Budgeted Direct labour hours	17500000/2500000
Weaving overhead rate	$7/hour

Requirement 3
	Cost per unit of input	Input per unit of output	Budgeted Unit Cost
Wool Skiens	$5	40	$200
Dye	$8	0.75	$6
Direct manufacturing labor	$15	48	$720
Dyieng overhead	$7	10	$70
Weaving Overhead	$2.6	48	$128.8
Total			$1,124.8

Requirement 4

Revenue Budget
	Units	Selling Price	Total Revenues
Blue Rugs	250000	$2200	$550,000,000
Blue Rugs	225000	$2200	$495,000,000

Requirement 5
Cost of Goods Sold Budget
	250000	225000
Begnning Finished goods inventory	0
Direct Material Used
Wool	50,000,000	45,000,000
Dye	1,500,000	1,350,000
	51,500,000	46,350,000
Direct manufacturing labor	180,000,000	162,000,000
Manufacturing overhead	17,500,000	2,250,000
Cost of goods manufactured	32,200,000	28,080,000
Cost of goods available for sale	281,200,000	238,680,000
Deduct ending finished goods inventory	0	28120,000
Cost of goods sold	281,200,000	210,560,000