Question

Hajor'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 12,000 square feet, and Hajor is using only 80% of this capacity. Hajor records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Hajor: (Click the icon to view the budgeted information.) (Click the icon to view other information.) Read the requirements. i Requirements Requirement 1. Calculate the cost per unit of cost driver for each indirect cost pool. Select the formula you will use, then calculate the cost driver rate. (Round your answers to the nearest cent. Abbreviations used: "equip, equipment, "main 1. Cost driver rate 2. 3. Calculate the budgeted cost per unit of cost driver for each indirect cost pool What is the budgeted cost of unused capacity? What is the budgeted total cost and the cost per unit of resources used to produce (a) basketballs and (b) volleyballs? Why might excess capacity be beneficial for Hajor? What are some of the issues Hajor should consider before increasing production to use the space? X 4. Data Table Print Done i Data Table Hajor's Netballs Budgeted Costs and Activities For the Year Ended December 31, 2017 Direct materials-basketballs $ Direct materials-volleyballs Direct manufacturing labor-basketballs Direct manufacturing labor-volleyballs Setup Equipment and maintenance costs 234.500 775,840 109,100 Other budget information follows: 100,210 126,000 108,650 156,000 Basketballs 57,000 12,500 Volleyballs 140,000 Number of balls 14,000 Lease rent ? Machine-hours Number of setups Square footage of production space used 200 500 $ 1,610,300 Total 3,250 6,350 Check Answer

Answer 1

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А B C D E F G H J 1 2 1 3 Number of setups/batches Machine-hours 4 14000 5 |Basketballs Vollyballs Total 200 500 12500 Total overhead of each cost pool / Total cost drivers 126000 / 108650 / 156000 / 700 26500 Cost driver rate 700 180 per batch 26500 4.1 per machine hour 12000 13 per suare feet 6 7 Setup cost per batch Equipment and Maintenance Lease rent 8 9 10 2 Unused capacity Total capacity Capcity used for basketball production 3250- Capacity used for vollyball production 6350 11 12000 - 12 2400 13 14 Cost of unused capacity 13 per square feet* 2400 Sq.feet 31200 15

А B D E F 16 17 3 Basketballs Paarticulars Direct materials Direct manufacturing labor Volleybal Total 234500 775840 18 1010340 19 109100 100210 209310 20 set up 36000 21 51250 90000 57400 82550 1106000 126000 108650 124800 1579100 22 Equipment Lease rent Budgeted total cost Number of units Budgeted cost per unit 42250 23 473100 24 57000 8.3 140000 7.9 25 26 27 4 28 Hajor's Netballs currently using 80% of its capacity. The excess capacity is currently costing Hajor's $ 31,200 (156,000-124,800) Hajor shold consider using the excess capacity for expansion of its production for existing models or add a new product line in the future. 29 30 31 32 33 On the other hand having excess capacity might also be beneficial to Hajor's. It allows the company to accept special orders if they are recevied and to reduce the confusion and complexity that occurs when a plant is operating at full capacity 34 35 36

For calculation ref:

A B с D E F 1 2 1 3 Number of setups/batches 4 Machine-hours 5 6 Setup cost per batch 7 Equipment and Maintenance 8 Lease rent 9 10 2 Unused capacity 11 Basketballs Vollyballs 200 500 12500 14000 Total overhead of each cost pool / 126000 / 108650 1 156000 / Total =SUM(C3:D3) =SUM(C4:04) Total cost drivers =E3 p Cost driver rate =C6/E6 =C7/E7 =C8/E8 =E4 12000 P p Total capacity 12000 =C11-E11-G11 Capcity used for basketball production 3250 6 12 13 14 Cost of unused capacity 13 per square feet* 2400 Sq.feet =C12*F8 15

A B C D E 16 17 3 Paarticulars Basketballs Volleyballs Total 18 Direct materials 234500 775840 =SUM(C18:D18) 19 Direct manufacturing labor 109100 100210 =SUM(C19:D19) 20 Set up =200*F6 =500*F6 =SUM(C20:D20) 21 Equipment =12500*F7 =14000*F7 =SUM(C21:021) 22 Lease rent =3250*F8 =6350*F8 =SUM(C22:D22) 23 Budgeted total cost =SUM(C18:C22) =SUM(D18:D22) =SUM(E18:E22) 24 Number of units 57000 140000 25 Budgeted cost per unit =C23/C24 =D23/D24 26 27 4 Hajor's Netballs currently using 80% of its capacity. 28 The excess capacity is currently costing Hajor's $ 31,200 (156,000-124,800) 29 Hajor shold consider using the excess capacity for expansion of its production for existing models or add a new product line in 30 the future. 31 32 33 34 On the other hand having excess capacity might also be beneficial to Hajor's. It allows the company to accept special orders if they are recevied and to reduce the confusion and complexity that occurs when a plant is operating at full capacity 35 36 37