Shades & Hues (S&H) is a designer of high-quality curtains and bedsheets. Each design is made in small batches. Each spring, S&H comes out with new designs for the curtains and for the bedsheets. The company uses these designs for a year and then moves on to the next trend. The products 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. hipping costs vary with the number of shipments. Budgeted information for the year is as follows:

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 budgeted cost per unit of cost driver for each cost category.
4. Calculate the budgeted total costs and cost per unit for each product line.
5. Explain how you could use the information in requirement 4 to reduce costs.

Transcribed Image Text:

Shades & Hues Budget for Costs and Activities For the Year Ended February 28, 2020 Direct materials bedsheets Direct materials-curtains Direct manufacturing labor-bedsheets Direct manufacturing labor-curtains Setup Shipping Design Plant utilities and administration Total $ 3,82,260 5,10,425 1,12,500 1,26,000 78,250 84,500 1,93,200 2,55,775 $17,42,910