Posie 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 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. 1 Data Table Posie Bags Budget for Costs and Activities For the Year Ended February 28, 2014 $ Direct materials-purses Direct materialsbackpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks Setup Shipping 342,200 470,850 87,000 116,100 90,675 71,370 165,000 221,000 Design Plant utilities and administration $ 1,564,195 Total Other budget information follows: Backpacks Purses Total Number of bags 9,350 4,250 Hours of production 6,450 1,665 115 4 2,900 2,585 80 2 195 Number of batches Number of designs Print Print Done Done A Requirements - X 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 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. Print Done