Question
J 5-41 Unused capacity, activity-based costing, activity-based management. Archer Pro manufactures two models of sport bows, Basic and Deluxe, using a combination of machining
J 5-41 Unused capacity, activity-based costing, activity-based management. Archer Pro manufactures two models of sport bows, 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 10,000 square feet, and Archer Pro is using only 75% of this capacity. Archer Pro records the cost of unused capacity as a sepa- rate line item and not as a product cost. For the current year, Archer Pro has budgeted the following: Your Archer Pro Budgeted Costs and Activities for the each Year Ended December 31, 2017 Direct materials-Basic bows $ 450,000 p2mation? Direct materials-Deluxe bows 320,000 Direct manufacturing labor-Basic bows 155,000 Direct manufacturing labor-Deluxe bows 195,000 Indirect manufacturing labor costs 105,000 pected to Machine setup costs 60,000 the pro- Equipment and maintenance costs 264,000 Facility rent 250,000 Total $1799,000 Other budget information follows: 13 nsa atitsmed tedWo aplis n Tebiana bluona 1862 JedW S Basic Deluxe at 290 a ai ziediet Number of bows 10,000 5,000 aqu Machine-hours 15,000 18,000 ir tong Number of setups 500 $300 sm bus namqp Square footage of production space used 4,000 3,500 3 1001 91 1. Calculate the cost per unit of each cost-allocation base. 2. What is the budgeted cost of unused capacity? 21.000
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