Question

Unused capacity, activity-based costing, activity-based management. 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, 2014
	Direct materials-Basic kayaks						$                325,000
	Direct materials-Deluxe kayaks						240,000
	Direct manufacturing labor-Basic kayaks						110,000
	Direct manufacturing labor-Deluxe kayaks						130,000
	Indirect manufacturing labor costs						72,000
	Machine setup costs						40,500
	Equipment and maintenance costs						235,000
	Facility rent						200,000
	Total						$             1,352,500
Other budgeted information follows:
							Basic		Deluxe
	Number of kayaks						5,000		3,000
	Machine-hours						11,000		12,500
	Number of setups						300		200
	Square footage of production space used						2,860		2,140

1a)	Calculate the budgeted total cost for the Basic model.
1b)	Calculate the budgeted cost per unit for the Basic model.
1c)	Calculate the budgeted total cost for the Deluxe model.
1d)	Calculate the budgeted cost per unit for the Deluxe model.

Answer 1

Answer:-1a)- The budgeted total cost for the Basic model= Direct materials+ Direct manufacturing labor+ Indirect manufacturing + Machine setup costs+ Equipment and maintenance costs+ Facility rent

=$325000+$110000+$33000+$24300+$110000+$114400 = 716700

1b)-The budgeted cost per unit for the Basic model=$7167000/5000 units =$143.34 per unit

1c)- The budgeted total cost for the Deluxe model= Direct materials+ Direct manufacturing labor+ Indirect manufacturing + Machine setup costs+ Equipment and maintenance costs+ Facility rent

=$240000+$130000+$39000+$16200+$125000+$85600 = $635800

1d)-The budgeted cost per unit for the Deluxe model=$635800/3000 units =$211.93 per unit

Explanation:-Indirect manufacturing costs =$72000

Total Direct manufacturing labor of both model =$110000+$130000 = $240000

Indirect manufacturing costs of Basic model =($72000*$110000)/$240000 =$33000

Indirect manufacturing costs of Deluxe model =($72000*$130000)/$240000 =$39000

Machine set up cost =$40500

Total no. of set up of both model =300+200= 500 set up

Machine set up cost of Basic model =($40500*300 setup)/500 set up =$24300

Machine set up cost of Delxue model =($40500*200 set tp)/500 set up=$16200

Equipment & maintenance cost =$235000

Total machine hours of both model =11000+12500= 23500 hours

Equipment & maintenance cost of Basic model =($235000*11000 hours)/23500 hours=$110000

Equipment & maintenance cost of Delxue model =($235000*12500 hours)/23500 hours=$125000

Facility rent =$200000

Total square footage of production space used of both model =2860+2140 =5000

Facility rent of Basic model =($200000*2860)*5000 =$114400

Facility rent of Basic model =($200000*2140)*5000 =$85600