The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: Dyeing (based on 1,440,000 MH) Weaving (based on 12,400,000 DMLH) Variable costs $15,400,000 Indirect materials Maintenance 6,560,000 5,540,000 7,550,000 Utilities 2,890,000 Fixed costs 347,000 Indirect labor 1,700,000 Depreciation 2,100,000 274,000 Other 723,000 5,816,000 $31,620,000 $17,280,000 Total budgeted costs

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Xander Manufacturing Company manufactures blue rugs, using wool and dye as direct materials. One rug is budgeted to use 36 skeins of wool at a cost of $2 per skein and 0.8 gallons of dye at a cost of $6 per gallon. All other materials are indirect. At the beginning of the year Xander has an inventory of 458,000 skeins of wool at a cost of $961,800 and 4,000 gallons of dye at a cost of $23,680. Target ending inventory of wool and dye is zero. Xander uses the FIFO inventory cost-flow method. Xander blue rugs are very popular and demand is high, but because of capacity constraints the firm will produce only 200,000 blue rugs per year. The budgeted selling price is $2,000 each. There are no rugs in beginning inventory. Target ending inventory of rugs is also zero. Xander 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). There is no direct manufacturing labor cost for dyeing. Xander budgets 62 direct manufacturing laborhours to weave a rug at a budgeted rate of $13 per hour. It budgets 0.2 machine-hours to dye each skein in the dyeing process.

Q.Find the budgeted gross margin for blue rugs under each sales assumption.

The following table presents the budgeted overhead costs for the dyeing and weaving cost pools:
Dyeing
(based on 1,440,000 MH)
Weaving
(based on 12,400,000 DMLH)
Variable costs
$15,400,000
Indirect materials
Maintenance
6,560,000
5,540,000
7,550,000
Utilities
2,890,000
Fixed costs
347,000
Indirect labor
1,700,000
Depreciation
2,100,000
274,000
Other
723,000
5,816,000
$31,620,000
$17,280,000
Total budgeted costs
Transcribed Image Text:The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: Dyeing (based on 1,440,000 MH) Weaving (based on 12,400,000 DMLH) Variable costs $15,400,000 Indirect materials Maintenance 6,560,000 5,540,000 7,550,000 Utilities 2,890,000 Fixed costs 347,000 Indirect labor 1,700,000 Depreciation 2,100,000 274,000 Other 723,000 5,816,000 $31,620,000 $17,280,000 Total budgeted costs
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