=+6-48 KKK Choosing cost drivers, activity-based costing, activity-based management OBJECTIVES 7, 8, 9 Boast Sacs (BS) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, BS comes out with new designs for the backpack and for the purse. They use these designs for a year and then move on to the next trend. The bags are all made on the same fabrication equipment, which 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:

Boast Sacs Budget for costs and activities for the year ended 28 February 2013 Direct materials—purses 379 290 Direct materials—backpacks 412 920 Direct manufacturing labour—purses 98 000 Direct manufacturing labour—backpacks 120 000 Set-up 65 930 Shipping 73 910 Design 166 000 Plant utilities and administration 243 000 Total 1 559 050 Chapter 6: Activity-based costing and activity-based management 257 M06_HORN3377_02_LT_C06.indd 257 2/09/13 3:26 PM Other information:

Backpacks Purses Total Number of bags 6050 3350 9400 Hours of production 1450 2600 4050 Number of batches 130 60 190 Number of designs 2 2 4 Required 1 Identify the cost hierarchy level for each cost category.