II I I " I| II |I + ** + + + - 10/8/2021 Chapter 5 - Homework-sehrish bashir 3. Petal 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 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: 7(Click the icon to view the budgeted information.) Read the requirements. Requirement 1. Identify the cost hierarchy level for each cost category. Cost Cost Hierarchy Level () (2) Direct materials-purses Direct materials-backpacks Direct labor-purses () () (5) Direct labor-backpacks Setup Shipping (6) (7) (8) Design Plant utilities and administration Requirement 2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver. Cost Cost Driver Reason (9) (11) (0) (12) Direct materials-purses Direct materials-backpacks Direct labor-purses (13) (14) (16) (18) Direct labor-backpacks (15) (17) Setup (19) (20) Shipping Design (21) (22) (23) (24) Plant utilities and administration Requirement 3. Calculate the budgeted cost per unit of cost driver for each cost category. (Round the cost driver rates to four decimal places. Abbreviations used: "util." = utilities, "admin." = administration, "DM" = direct materials, "DL" = direct labor.) %3D %3D %3D Cost driver rate (25) (26) (27) DM-purses (28) DM-backpacks DL-purses (0) (31) DL-backpacks Setup costs Shipping costs (32) Design costs (33) 10/8/2021 Chapter 5 - Homework-sehrish bashir Plant util. and admin. (34) %3D Requirement 4. Calculate the budgeted total costs and cost per unit for each product line. Backpacks Purses Direct materials Direct labor Setup Shipping Design Plant utilities and administration Total costs The cost per backpack is and the cost per purse is Requirement 5. Explain how you could use the information in requirement 4 to reduce costs. Based on this analysis, over 50% of product cost relates to (35) Producing in small lots will Management may want to evaluate ways to reduce the smaller components like the to further reduce costs. Finally, management should review the design process for cost savings and examine why it takes so long to produce (38) 7: Data Table Petal Bags Budget for Costs and Activities For the Year Ended February 29, 2020 $4 317,200 456,250 Direct materials-purses Direct materials-backpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks 109,375 Setup 129,390 Shipping 73,910 Design 167,500 Plant utilities and administration 1,594,225 Total Other budget information follows: Backpacks Purses Total Number of bags 6,250 3,050 9,300 Hours of production 1,450 4,050 Number of batches 50. Number of designs 3. 5. 8/15 https://xlitemprod.pearsoncmg.com/api/v1/print/highered

II I I " I| II |I + ** + + + - 10/8/2021 Chapter 5 - Homework-sehrish bashir 3. Petal 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 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: 7(Click the icon to view the budgeted information.) Read the requirements. Requirement 1. Identify the cost hierarchy level for each cost category. Cost Cost Hierarchy Level () (2) Direct materials-purses Direct materials-backpacks Direct labor-purses () () (5) Direct labor-backpacks Setup Shipping (6) (7) (8) Design Plant utilities and administration Requirement 2. Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver. Cost Cost Driver Reason (9) (11) (0) (12) Direct materials-purses Direct materials-backpacks Direct labor-purses (13) (14) (16) (18) Direct labor-backpacks (15) (17) Setup (19) (20) Shipping Design (21) (22) (23) (24) Plant utilities and administration Requirement 3. Calculate the budgeted cost per unit of cost driver for each cost category. (Round the cost driver rates to four decimal places. Abbreviations used: "util." = utilities, "admin." = administration, "DM" = direct materials, "DL" = direct labor.) %3D %3D %3D Cost driver rate (25) (26) (27) DM-purses (28) DM-backpacks DL-purses (0) (31) DL-backpacks Setup costs Shipping costs (32) Design costs (33) 10/8/2021 Chapter 5 - Homework-sehrish bashir Plant util. and admin. (34) %3D Requirement 4. Calculate the budgeted total costs and cost per unit for each product line. Backpacks Purses Direct materials Direct labor Setup Shipping Design Plant utilities and administration Total costs The cost per backpack is and the cost per purse is Requirement 5. Explain how you could use the information in requirement 4 to reduce costs. Based on this analysis, over 50% of product cost relates to (35) Producing in small lots will Management may want to evaluate ways to reduce the smaller components like the to further reduce costs. Finally, management should review the design process for cost savings and examine why it takes so long to produce (38) 7: Data Table Petal Bags Budget for Costs and Activities For the Year Ended February 29, 2020 $4 317,200 456,250 Direct materials-purses Direct materials-backpacks Direct manufacturing labor-purses Direct manufacturing labor-backpacks 109,375 Setup 129,390 Shipping 73,910 Design 167,500 Plant utilities and administration 1,594,225 Total Other budget information follows: Backpacks Purses Total Number of bags 6,250 3,050 9,300 Hours of production 1,450 4,050 Number of batches 50. Number of designs 3. 5. 8/15 https://xlitemprod.pearsoncmg.com/api/v1/print/highered

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter1: Introduction To Managerial Accounting

Section: Chapter Questions

Problem 15E: Ethical Behavior Consider the following scenario between Dave, a printer, and Steve, an assistant in...

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