Unused capacity, activity-based costing, activity-based management. Whitewater A
ID: 2537938 • Letter: U
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. 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 2,140Explanation / Answer
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
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