Question

Wybock'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 17,000 square feet, and Wybock is using only 70% of this capacity. Wybock records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Wybock: (Click the icon to view the budgeted information.) 2 (Click the icon to view other information.) Read the 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, "maint." = maintenance.) Cost Total quantity of cost driver Cost driver rate Setup (1) Equip. and Maint. = (2) Lease rent, etc. (3) Requirement 2. What is the budgeted cost of unused capacity? Select the formula you will use, then calculate the cost of unused capacity. (4) (5) Cost of unused capacity Requirement 3. What is the budgeted total cost and the cost per unit of resources used to produce (a) basketballs and (b) volleyballs? (Enter the cost per unit to the nearest cent.) Basketballs Volleyballs Total Direct materials Direct manufacturing labor Setup Equipment and maintenance Lease rent, etc. Budgeted total costs Number of units Budgeted cost per unit Requirement 4. Why might excess capacity be beneficial for Wybock? What are some of the issues Wybock should consider before increasing production to use the space? Why might excess capacity be beneficial for Wybock? (Select all that apply.) A. The excess capacity could allow for expanded production of either of the existing models. B. The company could consider adding a new product line. C. Having excess capacity allows for the company to accept special orders if they are received. D. The excess capacity is costing Wybock money and therefore, cannot be beneficial to

Answer 1

1. Budgeted cost per unit of cost driver Activity Cost Pool Total Cost Activity Driver rate Set up Equipment and maintenance cost Lease rent Total Indirect cost $120,000 $103,400 $357,000 $580,400 750 23,500 17,000 $160.00 per set up $4.40 per machine hour $21.00 per square feet 2. Budgeted Cost of unused Capacity $107,100 (30 % of 17,000 square feet * $21 - Activity cost driver rate) 3. Budgeted Total Cost Basketballs Volleyballs Total $142,000 $260,550 $402,550 $110,600 $97,150 $207,750 Direct Material Direct Manufacturing Labor Overhead allocated Set up Equipment and maintenance cost Lease Rent Budgeted Total Cost Number of units Budgeted Cost per unit $96,000 $44,000 $73,500 $466,100 60,000 $7.77 $24,000 $120,000 $59,400 $103,400 $176,400 $249,900 $617,500 $1,083,600 70,000 $8.821 Allocation of Cost Basketballs Volleyballs Activity Rate Activities Consumed Total Cost Activities Consumed Total Cost Set up Equipment and maintenance cost Lease rent Total Activity Cost $160.00 $4.40 $21.00 600 10,000 3,500 $96,000 150 $44,000 13,500 $73,500 8,400 $213,500 $24,000 $59,400 $176,400 $259,800 4. Excess capacity can be beneficial for Option A, B and some of the issues should be considered before increasing production to use the space Option A, B and C