Identifying and managing unused capacity (continuation of 13-31). Refer to the information for

Music Master Company in 13-31.

Required

1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2011 based on actual production and actual number of customers served in 2011.

2. Suppose Music Master can add or reduce its selling and customer-service capacity in increments of five customers. What is the maximum amount of costs that Music Master could save in 2011 by downsizing selling and customer-service capacity?

3. Music Master, in fact, does not eliminate any of its unused selling and customer-service capacity. Why might Music Master not downsize?