Question

Jeeler​'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 Jeeler is using only 80​% of this capacity. Jeeler records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Jeeler​:

Jeeler's Netballs
Budgeted Costs and Activities
For the Year Ended December 31, 2017
Direct materials—basketballs	$219,800
Direct materials—volleyballs	464,150
Direct manufacturing labor—basketballs	111,200
Direct manufacturing labor—volleyballs	110,250
Setup	99,000
Equipment and maintenance costs	120,000
Lease rent	168,000
Total	$1,292,400

Other budget information​ follows:

	Basketballs	Volleyballs
Number of balls	57,000	120,000
Machine-hours	13,000	12,000
Number of setups	200	250
Square footage of production space used	3,450	7,750

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 JeelerJeeler​? What are some of the issues JeelerJeeler should consider before increasing production to use the​ space?

Answer 1