Could you please help me the solution of the question 2 below?
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c, the reciprocal method 2, Assume that all of the work of the IT department could be outsourced to an independent company for $97.50 per hour, If Activeware Limited no longer operated its own IT department, 30% of the xed costs of the IT department could be eliminated, Should Activeware Limited outsource its IT services? Question 2 (20 Marks) Crumpler Bags (CB) is a designer of high-quality backpacks and purses, Each design is made in small batches, Each spring, CB comesoutwith new designsforthe backpackand forthe 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 forthe year is asfollows: Crumpler Bags Budget for costs and Activities For the Year Ended 30 June 2020 Direct materials purses $379,290 Direct materials backpacks 412,920 Direct manufacturing labour purses 98,000 Direct manufacturing labour backpacks 120,000 Setup 65,930 Shipping 73,910 Design 166,000 Plant utilities and administration 243,000 Total $1,559,050 Other Budget information follows: Backpacks Purses Number of bags 6,050 3,350 Hours of production 1,450 2,600 Number of batches 130 60 Number of designs 2 2 Required: 1. Identify the cost hierarchy level for each cost category. 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. Question 3 (20 Marks) Anchor Homes Ltd manufactures modular homes. The company has two main products that it sells commercially: a 1,000 square foot, one-bedroom model and a 1,500 square foot, two- bedroom model. The company recently began providing emergency housing (huts) to Emergency Management Australia (EMA). The emergency housing is similar to the 1,000 square foot model. EMA has requested Anchor Homes Ltd to create a bid for 150 emergency huts to be sent for flood victims in the east. Your boss has asked that you prepare this bid. In preparing the bid, you find a recentinvoice to EMA for 200 huts provided aftertropical cyclone Debbie. You also have a standard cost sheet for the 1,000 square foot model sold commercially. Both are provided as follows: Standard cost sheet: 1,000 sq. ft. one-bedroom model Direct materials $8,000 Direct manufacturing labour (30 hours) 600 Manufacturing overhead" ($3 per direct labour dollar) 1,800 Total cost $10,400 Retail markup on total cost 20% Retail price $12,480 *Dverhead cost pooi includes inspection labour ($15 per hour), setup labour ($12 per hour), and other indirect costs associated with production
