Xander blue rugs are very popular and demand is high, but because of capacity co
ID: 2328563 • Letter: X
Question
Xander blue rugs are very popular and demand is high, but because of capacity constraints the firm will produce only 190,000 blue rugs per year. The budgeted selling price is $1,900 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)Explanation / Answer
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Direct Material Usage Budget in Quantity and Dollars Material Wool Dye Total Physical Units Budget Direct materials required for Blue rugs 6080000 skeins 142500 gal. Cost Budget Available from beginnning direct materials inventory (under a FIFO cost-flow assumption) Wool $ 802,800 Dye $ 22,620 To be purchased this period Wool [$2 x (6080000 - 446000)] $ 11,268,000 Dye [$5 x (142500 - 3900)] $ 693,000 Direct materials to be used this period $ 12,070,800 $ 715,620 $ 12,786,420Related Questions
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