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Whitewater Adventures manufactures two models of kayaks, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect manufacturing labor costs increase with direct manufacturing labor costs. Equipment and maintenance costs increase with the number of machine-hours, and facility rent is paid per square foot. Capacity of the facility is 6,250 square feet, and Whitewater is using only 80% of this capacity. Whitewater records the cost of unused capacity as a separate line item and not as a product cost. For the current year, Whitewater has budgeted the following: Whitewater Adventures Budgeted Costs and Activities For the Year Ended December 31, 2023 Direct materials-Basic kayaks Direct materials-Deluxe kayaks Direct manufacturing labor-Basic kayaks Direct manufacturing labor-Deluxe kayaks Indirect manufacturing labor costs Machine setup costs Equipment and maintenance costs Facility Rent Total Other budget information follows: Number of kayaks Machine-hours Number of setups Square footage of production space used Basic 5,000 11,000 300 2,860 $325,000 240,000 110,000 130,000 72,000 40,500 235,000 200,000 $1.352.500 Deluxe 3,000 12,500 200 2,140 Required: 1. Calculate the cost per unit of each cost-allocation base. 2. What is the budgeted cost of unused capacity? 3. Calculate the budgeted total cost and the cost per unit for each model. 4. Why might excess capacity be beneficial for Whitewater? What are some of the issues Whitewater should consider before increasing production to use the space?

Whitewater Adventures manufactures two models of kayaks, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect manufacturing labor costs increase with direct manufacturing labor costs. Equipment and maintenance costs increase with the number of machine-hours, and facility rent is paid per square foot. Capacity of the facility is 6,250 square feet, and Whitewater is using only 80% of this capacity. Whitewater records the cost of unused capacity as a separate line item and not as a product cost. For the current year, Whitewater has budgeted the following: Whitewater Adventures Budgeted Costs and Activities For the Year Ended December 31, 2023 Direct materials-Basic kayaks Direct materials-Deluxe kayaks Direct manufacturing labor-Basic kayaks Direct manufacturing labor-Deluxe kayaks Indirect manufacturing labor costs Machine setup costs Equipment and maintenance costs Facility Rent Total Other budget information follows: Number of kayaks Machine-hours Number of setups Square footage of production space used Basic 5,000 11,000 300 2,860 $325,000 240,000 110,000 130,000 72,000 40,500 235,000 200,000 $1.352.500 Deluxe 3,000 12,500 200 2,140 Required: 1. Calculate the cost per unit of each cost-allocation base. 2. What is the budgeted cost of unused capacity? 3. Calculate the budgeted total cost and the cost per unit for each model. 4. Why might excess capacity be beneficial for Whitewater? What are some of the issues Whitewater should consider before increasing production to use the space?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Whitewater Adventures manufactures two models of kayaks, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect manufacturing labor costs increase with direct manufacturing labor costs. Equipment and maintenance costs increase with the number of machine-hours, and facility rent is paid per square foot. Capacity of the facility is 6,250 square feet, and Whitewater is using only 80% of this capacity. Whitewater records the cost of unused capacity as a separate line item and not as a product cost. For the current year, Whitewater has budgeted the following: Scenario 1 Whitewater Adventures Budgeted Costs and Activities For the Year Ended December 31, 2023 Direct materials-Basic kayaks Direct materials-Deluxe kayaks Direct manufacturing labor-Basic kayaks Direct manufacturing labor-Deluxe kayaks Indirect manufacturing labor costs Machine setup costs Equipment and maintenance costs Facility Rent Total Other budget information follows: Number of kayaks Machine-hours Number of setups Square footage of production space used Basic 5,000 11,000 300 2,860 Required: 1. Calculate the cost per unit of each cost-allocation base. 2. What is the budgeted cost of unused capacity? $ 325,000 240,000 110,000 130,000 72,000 40,500 235,000 200,000 $1,352,500 Deluxe 3,000 12,500 200 2,140 3. Calculate the budgeted total cost and the cost per unit for each model. 4. Why might excess capacity be beneficial for Whitewater? What are some of the issues Whitewater should consider before increasing production to use the space?
Transcribed Image Text:Whitewater Adventures manufactures two models of kayaks, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect manufacturing labor costs increase with direct manufacturing labor costs. Equipment and maintenance costs increase with the number of machine-hours, and facility rent is paid per square foot. Capacity of the facility is 6,250 square feet, and Whitewater is using only 80% of this capacity. Whitewater records the cost of unused capacity as a separate line item and not as a product cost. For the current year, Whitewater has budgeted the following: Scenario 1 Whitewater Adventures Budgeted Costs and Activities For the Year Ended December 31, 2023 Direct materials-Basic kayaks Direct materials-Deluxe kayaks Direct manufacturing labor-Basic kayaks Direct manufacturing labor-Deluxe kayaks Indirect manufacturing labor costs Machine setup costs Equipment and maintenance costs Facility Rent Total Other budget information follows: Number of kayaks Machine-hours Number of setups Square footage of production space used Basic 5,000 11,000 300 2,860 Required: 1. Calculate the cost per unit of each cost-allocation base. 2. What is the budgeted cost of unused capacity? $ 325,000 240,000 110,000 130,000 72,000 40,500 235,000 200,000 $1,352,500 Deluxe 3,000 12,500 200 2,140 3. Calculate the budgeted total cost and the cost per unit for each model. 4. Why might excess capacity be beneficial for Whitewater? What are some of the issues Whitewater should consider before increasing production to use the space?
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