Hello,

I have the below problem to solve, could anybody help?

Unused capacity, activity-based costing, activity-based management. Zarsons 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:

Zarsons Netballs Budgeted Costs and Activities For the Year Ended December 31, 2014

Direct materialsbasketballs $168,100

Direct materialsvolleyballs 303,280

Direct manufacturing laborbasketballs 111,800

Direct manufacturing laborvolleyballs 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?