Zarson's Netballs is a manufacturer of high-quality basketballs and volleyballs. Setup costs are driven by the number of setups. 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, 2017

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:

Required

1. Calculate the budgeted cost per unit of cost driver for each indirect cost pool.

2. What is the budgeted cost of unused capacity?

3. What is the budgeted total cost and the cost per unit of resources used to produce (a) basketballs and (b) volleyballs?

4. Why might excess capacity be beneficial for Zarson? What are some of the issues Zarson should consider before increasing production to use the space?

Transcribed Image Text:

Basketballs Volleyballs Number of balls 58,000. 85,000 13,500... 10,500 Machine-hours Number of setups 450.. 300 Square footage of production space used 3,200.... 8,000