i Requirements X e cd ES 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. Print Done atid Perez 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. The company uses these designs for a year and then moves 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: (Click the icon to view the budgeted information.) Read the requirements Requiremont 1. Identify the cost hierarchy level for each cost category Cost Cost Hierarchy Level Direct materials-purses Direct materials-backpacks Direct labor-purses Direct labor---backpacks Setup Shipping Design Plant utilities and administration For the Year Ended February 28, 2014 $ 317,200 Direct materials-purses 456,250 97,600 Direct materials-backpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks 109,375 129,390 Setup 73,910 Shipping Design 167,500 243,000 Plant utilities and administration $ 1,594,225 Total Purses Total Other budget information follows: Backpacks Number of bags 6,250 Hours of production 1,450 3,050 9,300 2,600 4,050 140 50 190 Number of batches 3 Number of designs 2 5