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A company manufactures rugs using wool and dye as direct materials

Accounting

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A company manufactures rugs using wool and dye as direct materials. One rug is budgeted to use 28 skeins of wool at a cost of $4 per skein and 0.5 gallons of dye at a cost of $8 per gallon. The company applies the FIFO inventory cost method. The company expects to produce 80,000 rugs per year. The overhead costs for the company are accumulated in two cost pools, one for weaving and one for dyeing. Weaving overhead is allocated to products based on direct manufacturing labor hours and dyeing overhead is allocated to products based on machine hours. There is no direct manufacturing labor cost for dyeing. The company budgets 50 direct manufacturing labor hours to weave one rug at a budgeted labor rate of $25 per hour. The company budgets 0.2 machine hours to dye each skein in the dyeing process.

The following represents the budgeted overhead costs for dyeing and weaving.

                                                         Dyeing                                              Weaving

                                       (Based on 448,000 machine hours)   (Based on 4,000,000 direct labor hours)

Variable costs                                $875,000                                         $10,000,000                            

Fixed costs                                       357,000                                             5,200,000

Total budgeted costs                  $1,232,000                                        $15,200,000

Compute the budgeted unit cost for one rug.