Pumpkin 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 Requirement 1. Identify the cost hierarchy level for each cost category Cost Direct materials-purses Direct materials-backpacks Direct labor-purses Direct labor-backpacks Setup Shipping Cost Hierarchy Level Design Plant utilities and administration. Get more 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 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. Data table Pumpkin Bags Budget for Costs and Activities For the Year Ended February 28, 2014 Direct materials-purses $ 374,850 Direct materials-backpacks 443.750 Direct manufacturing labor-purses 100,000 Direct manufacturing labor-backpacks 115,625 Setup 186,550 Shipping 09.905 Design 164,000 Plant utilities and administration 225.500 $1,600.900 Total Other budget information follows: Backpacks Purses Total Number of bags Hours of production 6,250 3.150 9,400 1.550 2.550 4,100 Number of batches 155 50 205 Number of designs 2 2 4