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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 fumiture 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 $$18$ per hour.

$\backslash$table$[[$Materials handling,Budgeted Cost Cost Driver$],[$Product scheduling,$$363,600$ Number of parts$],[$Setup labor,$155,200$ Number of production orders$],[$Automated machinery,$196,600$ Number of setups$],[$Finishing$,1,540,000$ Machine hours$],[$Pack and ship,$551,400$ Direct labor hours$],[$General$,$ selling, and adninistrative costs,$255,600$ Number of orders shipped$],[,$$$3,062,400$