Problem $5-40($Algo$)$ Activity$-$Based Costing; Customer Group Cost Analysis $[$LO $5-1,5-3,5-6]$

Franklin Furniture Incorporated $($FFI$)$ manufactures bedroom furniture in sets $($a set includes a dresser, two queen$-$size beds, and one bedside table$)$ for use in motels and hotels. FFI has three customer groups, which it calls the value, quality, and luxury groups. The value products are targeted to low$-$price motels that are looking for simple furniture, while the luxury furniture is targeted to the very best hotels. The value line is attractive to a variety of hotels and motels that appreciate the combination of quality and value. Currently there has been a small increase in the quality and value lines, and an appreciable increase in demand in the luxury line, reflecting cyclical changes in the marketplace. Luxury hotels are now in more demand for business travel, while a few years ago, the value segment was the most popular for business travelers. FFI wants to be able to respond to the increased demand with increased production but worries about the increased production cost and about price setting as its mix of customers and production changes. FFI has used a volumebased overhead allocation rate based on direct labor hours for some time. Direct labor cost is $$15$ per hour.

$\backslash$table$[[,$Budgeted Cost Cost Driver$],[$Materials handling,$$314,600$ Number of parrts$],[$Product scheduling,$142,400$ Number of production orders$],[$Setup labor,$237,600$ Number of setups$],[$Automated machinery,$1,452,500$ Machine hours$],[$Finishing$,638,100$ Direct labor hours$],[$Pack and ship,$261,400$ Number of orders shipped$],[$General$,$ selling, and administrative costs,$$3,046,600$