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 $ 168,100 303,280 Direct materials-basketballs Direct materials-volleyballs Direct manufacturing labor–basketballs Direct manufacturing labor-volleyballs Setup Equipment and maintenance costs 111,800 100,820 157,500 115,200 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 setups Square footage of production space used 450 300 3,200 8,000 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 con- sider before increasing production to use the space? Required
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 $ 168,100 303,280 Direct materials-basketballs Direct materials-volleyballs Direct manufacturing labor–basketballs Direct manufacturing labor-volleyballs Setup Equipment and maintenance costs 111,800 100,820 157,500 115,200 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 setups Square footage of production space used 450 300 3,200 8,000 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 con- sider before increasing production to use the space? Required
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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 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.
Transcribed Image Text: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
$ 168,100
303,280
Direct materials-basketballs
Direct materials-volleyballs
Direct manufacturing labor–basketballs
Direct manufacturing labor-volleyballs
Setup
Equipment and maintenance costs
111,800
100,820
157,500
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 setups
Square footage of production space used
450
300
3,200
8,000
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 con-
sider before increasing production to use the space?
Required
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