Nivag's Netballs Is A Manufacturer Of High Quality Basketballs And Volleyballs
Unused capacity, activity-based costing, activity-based management. Nivag'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 Nivag is using only 70% of this capacity. Nivag records the cost of unused capacity as a separate line item, and not as a product cost. The following is the budgeted information for Nivag:
|
Nivag's Netballs
Budgeted Costs and Activities
For the Year Ended August 31, 2012
|
|
Direct materials-basketballs
|
$ 209,750
|
|
Direct materials-volleyballs
|
358,290
|
|
Direct manufacturing labor-basketballs
|
107,333
|
|
Direct manufacturing labor-volleyballs
|
102,969
|
|
Setup
|
143,500
|
|
Equipment and maintenance costs
|
109,900
|
|
Lease rent
|
216,000
|
|
Total
|
$1,247,742
|
Other budget information follows:
|
|
Basketballs
|
Volleyballs
|
|
Number of balls
|
66,000
|
100,000
|
|
Machine-hours
|
11,000
|
12,500
|
|
Number of batches
|
300
|
400
|
|
Square footage of production space used
|
3,360
|
5,040
|
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. What factors should Nivag consider if it has the opportunity to manufacture a new line of footballs?