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. Requirement 1. Identify the cost hierarchy level for each cost category. Data Table Requirements - X Cost Direct materials-purses Direct materials-backpacks Direct labor-purses Direct labor-backpacks Setup Shipping Design Plant utilities and administration Cost Hierarchy Level Perez Bags 1. Identify the cost hierarchy level for each cost category. Budget for Costs and Activities For the Year Ended February 28, 2014 2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver. Direct materials-purses $ 334,750 Direct materials-backpacks 456,300 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. Direct manufacturing labor-purses 97,500 Direct manufacturing labor-backpacks 117,000 Print Done Setup 51,750 Shipping 72,000 Design 162,500 Plant utilities and administration Total 253,500 $ 1,545,300 Other budget information follows: Backpacks Purses Total Number of bags 5,850 3,250 9,100 Hours of production 1,600 2,625 4,225 Number of batches 163 62 225 Number of designs 2 3