Pumpkin Bags (PB) is a desiger of high quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. They use these designs for a year, and then move on to the next tent. The bags are all made on the same frabrication equipment that is expected to operate at capacity. The equipment must be switched over to a new design and set up to prepare for the productions of each new batch of products. When completed, each batch of products is immediately shipped to a whole-seller, shipping cost vary with the number of shipments. Budgeted information for the year is as follow:
Pumpkin Bags
Budget for costs and Activities
For the year ended February 28, 2008
Direct materials- purses $362,000
Direct materials- backpacks 427,000
Direct manufacturing labor-puses 98,000
Direct manufacturing labor-backpacks 115,597
Setup 64,960
Shipping 72,065
Design 167,000
Plant utilities & administration 225,000
Total $1,531,622
Other information
Backpacks Purses Total
Number of bags 6,000 3,150 9,150
Hours of production 1,560 2,600 4,160
Number of batches 133 70 203
Number of designs 3 2 5
Requirements:
a. Identify the most appropriate cost driver for each cost category.
b. Calculate the cost per unit of cost driver for each cost category.
c. Calculate the total costs and cost per unit for each product line.