Pumpkin Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small

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Pumpkin Bags (PB) is a designer 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 one year and then move on to the next trend. The bags are all made on the same fabrication 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 production of each new batch of products. When completed, each batch of products is immediately shipped to a wholesaler. Shipping costs vary with the number of shipments. Budgeted information for the year is as follows:

Pumpkin Bags Budgeted Costs and Activities for the Year Ending February 28, 2013 Direct materials purses

REQUIRED
1. Identify the cost hierarchy level for each cost category.
2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver.
3. Calculate the cost per unit of cost driver for each cost category.
4. Calculate the total costs and cost per unit for each product line.
5. Explain how you could use the information in requirement 4 to reduce costs.

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Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 978-0133392883

6th Canadian edition

Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ

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