Petunia
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
yea
is
as
follows:
B
(Click
the
icon
to
view
the
budgeted
information.)
Read
the
requirements.
Design
costs
$
167,500
-
5=
$
33,500.00
perdesign
Plant
util.
and
admin.
$
243000
-
4,050
$
60.00
per
hour
Requirement
4.
Calculate
the
budgeted
total
costs
and
cost
per
unit
for
each
product
line.
(Round
the
cost
per
unit
amounts
to
the
nearest
cent,
X
XX)
Backpacks
Purses
Direct
materials
$
456,250
$
317,200
Direct
labor
109,375
97,600
Setup
95,340
34,050
Shipping
54,460
19,450
Design
100,500
67,000
Plant
utilities
and
administration
87,000
156,000
$
902,925
$
691,300
Total
costs
The
cost
per
backpackis
$
14447
and
the
costperpurseis
&
226.66
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
direct
materials.
Producing
in
small
lots
will
increase
the
setup
and
shipping
costs.
Management
may
want
to
evaluate
ways
to
reduce
the
smaller
components
like
the
number
of
setups
and
the
cost
per
setup
to
further
reduce
costs.
Finally,
management
should
review
the
design
process
for
cost
savings
and
examine
why
it
takes
so
long
to
produce
purses
relative
to
backpacks.
