Marksman Boards manufactures two models of surfboards, Basic and Competition, in a facility in Southern California. In fabrication, machine setup costs are driven by the number of setups, machine maintenance and utility costs increase with the number of machine hours, and indirect labor costs increase with direct labor hours. Facility rent and machine depreciation are fixed, and are the basis of manufacturing capacity. Fixed costs are allocated equally to each unit produced, regardless of model. Currently,

Marksman uses 80% of its manufacturing capacity. The cost of unused capacity is not assigned to products, but is expensed as a separate line item. For 2020, Marksman has budgeted the following:

Data table

Marksman BoardsBudgeted Costs for theYear Ended December 31, 2020Direct materialsBasic boards$53,000Direct materialsCompetition boards268,000Direct manufacturing laborBasic boards672,000Direct manufacturing laborCompetition boards1,008,000Machine setup costs140,000Machine maintenance and utility costs407,500Indirect labor costs168,000Facility rent270,000Machine depreciation30,000

Other information:

BasicCompetitionUnits produced5,3006,700Machine hours26,00055,500Number of setups500900Direct labor-hours48,00072,000

Requirements

1.Calculate the cost-allocation rate for each of the activity-cost pools for variable and fixed overhead costs.2.Calculate the cost of unused capacity for the year.3.Calculate the total cost for each model, and the cost per unit for each model.4.

Marksman

has the opportunity to sublease the unused factory space to a startup company that will be manufacturing surf apparel. None of

Marksman's

machinery will be used. Is there a minimum annual rent that

Marksman

should charge? Are there any other considerations that

Marksman's

management should make prior to offering the space