Question #2 (36 Marks) Payton 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: Budget for Costs and Activities Direct Materials purses Direct materials backpacks Direct labour purses Direct labour backpacks Setup Shipping Design Plant utlites Total 405,665 457,775 104,400 112,100 69,680 74,880 168,000 225,500 1,618,000 Other Budget Information 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 83 208 number of designs 3 3 6 Required 1. Identify the cost hierarchy level for each cost category. (8 marks) 2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver. (8 marks) 3. Calculate the budgeted cost per unit of cost driver for each cost category. (8 marks) 4. Calculate the budgeted total costs and cost per unit for each product line. (12 marks)