Xiang 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 $4 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 Xiang has an inventory of 462,000 skeins of wool at a cost of $1,062,600 and 4,200 gallons of dye at a cost of $25,200. Target ending inventory of wool and dye is zero. Xiang uses the FIFO inventory cost flow method. Xue blue rugs are very popular and demand is high, but because of capacity constraints, the firm will produce only 220,000 blue rugs per year. The budgeted selling price is $2,200 each. There are no rugs in beginning inventory. Target ending inventory of rugs is also zero. There is no direct manufacturing labor cost for dyeing. Xuereb budgets 55 direct manufacturing labor-hours to weave a rug at a budgeted rate of $15 per hour. It budgets 0.25 machine-hours to dye each skein in the dyeing process. Xue 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).The following table presents the budgeted overhead costs for the dyeing and weaving cost pools: Dyeing Weaving (based on 1,520,000 MH) (based on 13,300,000 DMLH)Variable costsIndirect materials $0 15,500,000Maintenance 6,580,000 5,560,000Utilities 7,570,000 2,480,000Fixed costs Indirect labor 367,000 1,810,000Depreciation 2,120,000 280,000Other 743,000 5,830,000Total budgeted costs 17,380,000 31,460,000Requirements1. Prepare a direct material usage budget in both units and dollars.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 Xue sells (a) 220,000 or (b) 195,000 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 195,000 blue rugs?8. How might top management at Xue use the budget developed in requirements 1-6 to better manage the company?