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 volume$-$based overhead allocation rate based on direct labor hours for some time. Direct labor cost is $$15$ per hour.

Budgeted Cost Cost Driver

Materials handling $ $349,600$ Number of parts

Product scheduling $160,000$ Number of production orders

Setup labor $216,000$ Number of setups

Automated machinery $1,750,000$ Machine hours

Finishing $619,500$ Direct labor hours

Pack and ship $290,400$ Number of orders shipped

$ $3,385,500$

General, selling, and administrative costs $ $5,000,000$

The budgeted production data for the three product lines follow.

Product Lines Value Quality Luxury

Sets produced $15,0005,000600$

Price $ $650$ $ $900$ $ $1,200$

Direct materials cost per set $ $80$ $ $50$ $ $110$

Number of parts per set $3050120$

Direct labor hours per set $457$

Machine hours per set $3715$

Production orders $5070200$

Production setups $205050$

Orders shipped $1,0002,000300$

Number of inspections $2614$

Required:

$1.$ Determine the cost per set and the total production cost of each of the three customer groups using activity$-$based costing.

$2.$ Determine the production cost for each of the three customer groups using FFI$$s current volume$-$based approach.

$($For all requirements, round your intermediate calculations and final answers $2$ decimal places.$)$