Zarson'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 Zarson is using only 70% of this capacity. Zarson records the cost of unused capacity as a separate line item and not as a product cost. The following is the budgeted information for Zarson:

Zarson's Netballs

Budgeted Costs and Activities

For the Year Ended December 31, 2017

Direct materialsbasketballs $234,200

Direct materialsvolleyballs 263,460

Direct manufacturing laborbasketballs 110,400

Direct manufacturing laborvolleyballs 100,640

Setup 117,000

Equipment and maintenance costs 81,900

Lease rent 240,000

Total $1,147,600

Other budget information follows:

	Basketballs	Volleyballs
Number of balls	62,000	85,000
Machine-hours	10,000	11,000
Number of setups	350	300
Square footage of production space used	3,400	5,000

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.	Why might excess capacity be beneficial for Zarson? What are some of the issues Zarson should consider before increasing production to use the space?