Question

Bichop'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 10,000 square feet, and Bichop is using only 70% of this capacity. Bichop records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Bichop: (Click the icon to view the budgeted information.) (Click the icon to view other information.) Read the requirements.

Answer 1

1		Cost	Basketballs	Volleyballs	Total	Budgeted Cost per unit
	Setup cost	$142,500	250	500	750	$190	Per setup	(142500/750)
	Equipment and Maintenance Costs	$96,600	10000	13000	23000	$4	Per Hour	(96600/23000)
	Lease rent	$160,000			10000	$16	Per square foot	(160000/10000)
		$399,100
2	Budgeted cost of unsed capacity =	$48,000	(16*3000)
		Basketballs		Volleyballs
3		Total cost	Per unit cost	Total cost	Per unit cost
	Direct Materials	$187,900	$3.36	$181,960	$2.43
	Direct Labor	$110,600	$1.98	$98,340	$1.31
	Setup cost	$47,500	$0.85	$95,000	$1.27
	Equipment and Maint. Cost	$42,000	$0.75	$54,600	$0.73
	Lease rent	$54,400	$0.97	$57,600	$0.77
		$442,400	$7.90	$487,500	$6.50
	Number of balls	56,000		75,000
4	If Bichop uses it's acccess capacity it will increase reduce the overall cost. However, Bichop should consider that whether there is
	sufficient market demand to absorb additional products. Further Bichop should consider that whether it is required to reduce the sale price in order to sale more.