Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 6, Problem 6.27E
Budgeting; direct material usage,
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,
There is no direct manufacturing labor cost for dyeing. Xander budgets 62 direct manufacturing labor-hours 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.
The following table presents the budgeted overhead costs for the dyeing and weaving cost pools:
| Dyeing | Weaving | |
| (based on 1,440,000 MH) | (based on 12,400,000 DMLH) | |
| Variable costs | ||
| Indirect materials | $ 0 | $15,400,000 |
| Maintenance | 6,560,000 | 5,540,000 |
| Utilities | 7,550,000 | 2,890,000 |
| Fixed costs | ||
| Indirect labor | 347,000 | 1,700,000 |
| |
2,100,000 | 274,000 |
| Other | 723,000 | 5,816,000 |
| Total budgeted costs | $17,280,000 | $31,620,000 |
- 1. Prepare a direct materials usage budget in both units and dollars. Required
- 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. Prepare a revenues budget for blue rugs for the year, assuming Xander sells (a) 200,000 or (b) 185,000 blue rugs (that is, at two different sales levels).
- 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. What actions might you take as a manager to improve profitability if sales drop to 185,000 blue rugs?
- 8. How might top management at Xander use the budget developed in requirements 1–6 to better manage the company?
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Budgeting; direct material usage, manufacturing cost, and gross margin. Xander ManufacturingCompany manufactures blue rugs, using wool and dye as direct materials. One rug is budgeted to use 36skeins 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 costof $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 firmwill produce only 200,000 blue rugs per year. The budgeted selling price is $2,000 each. There are no rugs inbeginning 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.…
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…
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…
Chapter 6 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 6 - What are the four elements of the budgeting cycle?Ch. 6 - Define master budget.Ch. 6 - Strategy, plans, and budgets are unrelated to ore...Ch. 6 - Budgeted performance is a better criterion than...Ch. 6 - Production managers and marketing managers are...Ch. 6 - Budgets meet the cost-benefit test. They force...Ch. 6 - Define rolling budget. Give an example.Ch. 6 - Outline the steps in preparing an operating...Ch. 6 - The sales forecast is the cornerstone for...Ch. 6 - Prob. 6.10Q
Ch. 6 - Define Kaizen budgeting.Ch. 6 - Prob. 6.12QCh. 6 - Explain how the choice of the type of...Ch. 6 - What are some additional considerations that arise...Ch. 6 - Prob. 6.15QCh. 6 - Master budget. Which of the following statements...Ch. 6 - Operating and financial budgets. Which of the...Ch. 6 - Production budget. Superior Industries sales...Ch. 6 - Responsibility centers. Elmhurst Corporation is...Ch. 6 - Cash budget. Mary Jacobs, the controller of the...Ch. 6 - Sales budget, service setting. In 2017 Hart Sons,...Ch. 6 - Sales and production budget. The Coby Company...Ch. 6 - Direct material budget. Dawson Co. produces wine....Ch. 6 - Material purchases budget. The McGrath Company has...Ch. 6 - Revenues, production, and purchases budgets. The...Ch. 6 - Revenues and production budget. Saphire, Inc.,...Ch. 6 - Budgeting; direct material usage, manufacturing...Ch. 6 - Budgeting, service company. Ever Clean Company...Ch. 6 - Budgets for production and direct manufacturing...Ch. 6 - Activity-based budgeting. The Jerico store of...Ch. 6 - Kaizen approach to activity-based budgeting...Ch. 6 - Responsibility and controllability. Consider each...Ch. 6 - Responsibility, controllability, and stretch...Ch. 6 - Cash flow analysis, sensitivity analysis....Ch. 6 - Budget schedules for a manufacturer. Hale...Ch. 6 - Budgeted costs, Kaizen improvements environmental...Ch. 6 - Revenue and production budgets. (CPA, adapted) The...Ch. 6 - Budgeted income statement. (CMA, adapted) Smart...Ch. 6 - Prob. 6.39PCh. 6 - Comprehensive problem with ABC costing. Animal...Ch. 6 - Cash budget (continuation of 6-40). Refer to the...Ch. 6 - Comprehensive operating budget. Skulas, Inc.,...Ch. 6 - Cash budgeting, budgeted balance sheet....Ch. 6 - Comprehensive problem; ABC manufacturing, two...Ch. 6 - Cash budget. (Continuation of 6-44) (Appendix)...Ch. 6 - Budgeting and ethics. Jayzee Company manufactures...Ch. 6 - Kaizen budgeting for carbon emissions. Apex...Ch. 6 - Comprehensive budgeting problem; activity-based...
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