Pippin Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB 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, 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: (Click the icon to view the budgeted information.) Read the requirements. Data table Requirement 1. Identify the cost hierarchy level for each cost category. Cost Direct materials purses and backpacks Direct manufacturing labor-purses and backpacks Setup Shipping Design Plant utilities and administration Pippin Bags Budget for Costs and Activities for the Year Ended February 28, 2013 Requirements Direct materials-purses $ 401,225 Direct materials - backpacks Direct manufacturing labor - purses 469,875 97,000 1. Identify the cost hierarchy level for each cost category. Cost Hierarchy Level 2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver. 3. Calculate the budgeted total cost per unit of coat 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. Direct manufacturing labor-backpacks Setup Shipping Design 117,000 65,000 72,400 170,000 225,500 Plant utilities and administration $ 1,618,000 Total Print Done Other budget information follows: Backpacks Purses Total Number of bags 5,900 3,600 9,500 Hours of production 1,550 2,550 4,100 Number of batches 125 75 200 Number of designs 2 3 5