Reference no: EM131204934
Unused capacity, activity-based costing, activity-based management. Zarson’s Netballs is a manufacturer of high-quality basketballs and volleyballs. Setup costs are driven by the number of batches. Equipment and maintenance costs increase with the number of machine-hours, and lease rent is paid per square foot. Capacity of the facility is 14,000 square feet, and Zarson is using only 80% of this capacity. Zarson records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Zarson:
Zarson’s Netballs Budgeted Costs and Activities For the Year Ended December 31, 2014
Direct materials—basketballs $168,100
Direct materials—volleyballs 303,280
Direct manufacturing labor—basketballs 111,800
Direct manufacturing labor—volleyballs 100,820
Setup 157,500
Equipment and maintenance costs 115,200
Lease rent 210,000
Total $1,166,700
Other budget information follows:
Basketballs Volleyballs
Number of balls 58,000 85,000
Machine-hours 13,500 10,500
Number of batches 450 300
Square footage of production space used 3,200 8,000
Calculate the budgeted cost per unit of cost driver for each indirect cost pool. What is the budgeted cost of unused capacity? What is the budgeted total cost and the cost per unit of resources used to produce (a) basketballs and (b) volleyballs? Why might excess capacity be beneficial for Zarson? What are some of the issues Zarson should con- sider before increasing production to use the space?
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: Unused capacity, activity-based costing, activity-based management. Zarson’s Netballs is a manufacturer of high-quality basketballs and volleyballs. Setup costs are driven by the number of batches. Calculate the budgeted cost per unit of cost driver ..
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