- Data table Payton Bags Budget for Costs and Activities For the Year Ended February 28, 2014 Direct materials-purses $ 393,750 Direct materialsbackpacks 466,200 Direct manufacturing labor-purses 94,500 Direct manufacturing labor-backpacks 119,700 Setup 21,420 Shipping 70,980 163,000 208,000 Plant utilities and administration $ 1,537,550 Total Other budget information follows: Backpacks Purses Total Number of bags 6,300 3,150 9,450 Design Print Done Data table $ TOIMIC TCAI CIUCU I truary 20, 2014 Direct materials-purses $ 393,750 Direct materials-backpacks 466,200 Direct manufacturing labor-purses 94,500 Direct manufacturing labor-backpacks 119,700 Setup 21,420 Shipping 70,980 Design 163,000 Plant utilities and administration 208,000 $ 1,537,550 Total Other budget information follows: Backpacks Purses Total Number of bags 6,300 3,150 9,450 Hours of production 1,525 2,635 4,160 Number of batches 135 75 210 Number of designs 3 2. 5 Print Done 8. Payton Bags (P8) Is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring. Pe 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 (21) | 24 Requirement 1. Identify the cost hierarchy level for each cost category. Cost Cost Hierarchy Level Direct materials purses (1) Direct materiais backpacks (2) Direct labor-purses (3) Direct labor-backpacks Setup (5) Shipping (6) Design 7) Plant utilities and administration (8) Requirement 2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver. Cost Coat Driver Reason Direct materials purses (9) (10) Direct materiais backpacks (12) Direct labor-purses (13) Direct labor-backpacks (15) (16) Setup (17) (18) Shipping (19) (20) Design (22) Plant uilities and administration (23) Requirement 3. Calculate the budgeted cost per unit of cost driver for each cost category. (Round the cost driver rates to four decimal places. Abbreviations used ut." - uitles"admin."- administration, "OM" - direct materials. "DL - direct labor.) (26) Cost driver rate DMpurses (27) DM-backpacks (28) DL-purses (29) DL-backpacks (30) Setup costs (31) Shipping costs (32) Design costs (33) Plant uil. and admin. (34) Requirement 4. Calculate the budgeted total costs and cost per unit for each product line. (Round the cost per unit amounts to the nearest cent, X.XX.) Backpacks Purtas Direct materials Direct labor Setup Shipping Design Plant uilities and administration Total costs (25) The cost per backpack is and the cost per purse is Requirements. Explain how you could use the information In requirement 4 to reduce costs. Based on this analysis, over 50% of product cost relates to (35) Producing in smaillots will (36). Management may want to evaluate ways to reduce the smaller components like the (37) to further reduce costs. Finally, management should review the design process for cost savings and examine why it takes so long to produce (38) 1: Data Table Payton Bago Budget for Coats and Activities For the Year Ended February 28, 2014 Direct materialo-purses Direct materials-backpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks S 393,750 456.200 94,500 119,700 21,420 70,960 163,000 208,000 Setup Shipping Design Plant utilities and administration Total S 1.537.550 Other budget Information follows: Total Backpacks 6,300 1,525 135 Number of bags Hours of production Number of batches Number designs Purses 3,150 2,635 75 9,450 4,160 210 3 2 5 2: Requirements 1. Identify the cost hierarchy level for each cost category. 2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost drtver. 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. Product-sustaining cost (2) Product-sustaining cost Batch-level cost Batch-level cost Facility-sustaining cost Facility-sustaining cost Output unit-level cost Output unit-level cost (3) O Product-sustaining cost (4) Product-sustaining cost Batch-level cost Batch-level cost Facility-sustaining cost Facility-sustaining cost Output unit-level cost Output unit-level cost 3) (5) Product-sustaining cost (6) Product-sustaining cost Batch-level cost Facility-sustaining cost Output unit-level cost Batch-level cost Facility-sustaining cost Output unit-level cost (9) (10) Number of designs Number of purses The more the machines are used the higher the cost. Hours of production Number of backpacks Number of batches The cost is determined by the number of batches. The cost is determined by the number of designs. The cost is determined by the number of output. (11) (12) The more the machines are used the higher the cost Number of designs Number of purses Hours of production Number of backpacks Number of batches 0000 The cost is determined by the number of batches. The cost is determined by the number of designs. The cost is determined by the number of output (13) (14) Number of designs Number of purses The more the machines are used the higher the cost. Hours of production Number of backpacks Number of batches 0000 The cost is determined by the number of batches. The cost is determined by the number of designs. The cost is determined by the number of output. (15) Number of designs Number of purses The more the machines are used the higher the cost. Hours of production Number of backpacks Number of batches (16) O The cost is determined by the number of batches. The cost is determined by the number of designs. The cost is determined by the number of output. (17) (18) Number of designs Number of purses The more the machines are used the higher the cost. Hours of production Number of backpacks Number of batches 0000 The cost is determined by the number of batches. The cost is determined by the number of designs. The cost is determined by the number of output. (19) (20) Number of designs Number of purses ) The more the machines are used the higher the cost. 0000 Hours of production Number of backpacks Number of batches The cost is determined by the number of batches. The cost is determined by the number of designs. The cost is determined by the number of output. (21) (22) Number of designs Number of purses The more the machines are used the higher the cost. Hours of production Number of backpacks Number of batches 0000 The cost is determined by the number of batches. The cost is determined by the number of designs. The cost is determined by the number of output. (23) Number of designs Number of purses (24) O The more the machines are used the higher the cost. Hours of production Number of backpacks Number of batches The cost is determined by the number of batches. The cost is determined by the number of designs. The cost is determined by the number of output. (25) (26) (27) (28) per hour per purse Cost Number of output Total quantity of cost driver Cost Number of output Total quantity of cost driver per hour per backpack per purse per batch per design 0000 Oper backpack per batch per design (29) (30) (31) (32) per hour per backpack per purse per batch per design per hour per backpack per purse per batch per design 000 per hour per backpack per purse per batch per design O per hour per backpack per purse per batch per design (33) (34) per hour per purse per hour per backpack per purse per batch per design per backpack per batch per design (35) design direct labor. direct materials plant utilities and administration setup shipping