Reference no: EM131051704

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?