QUESTION A

CATEGORY / ACTIVITYRECOMMENDED COST DRIVER

Direct materials Number of products
Direct manufacturing labor Number of products
Setup Number of batches
Shipping Number of batches
Design Number of designs made
Plant, utlitities and administraHours of production
 RATIONALE

These costs are directly dictated by the number of items produced duri

Setup costs are incurred for each new batch of products to be made.
Items are shipped out per batch.
Costs of designs are incurred only when a new design is made.
MOH is incurred in parallel with the production hours of the plant.
QUESTION B

CATEGORY / ACTIVITY PURSES BAGS UNIT

Direct materials 103.79 73.68 per item produced
Direct manufacturing labor 32.20 18.30 per item produced
Setup 320.00 320.00 per batch setup done
Shipping 365.00 365.00 per batch shipping made
Design 42,250.00 42,250.00 per each design made
Plant, utlitities and administra 68.00 68.00 per hour of production
QUESTION C

COST PER UNIT OF

TOTAL ALLOCATION BASE
CATEGORY / ACTIVITY PURSES BAGS
COST PURSES BAGS
Direct materials 319,155.00 454,995.00 774,150.00 103.79 73.68
Direct manufacturing labor 99,000.00 113,000.00 212,000.00 32.20 18.30
Setup 25,600.00 38,400.00 64,000.00 320.00
Shipping 29,200.00 43,800.00 73,000.00 365.00
Design 84,500.00 84,500.00 169,000.00 42,250.00
Plant, utlitities and administra 107,780.00 113,220.00 221,000.00 68.00
Total 665,235.00 847,915.00 1,513,150.00
Number of units produced
3,075.00 6,175.00
per product
Cost per unit 216.34 137.31

The information above can be used to reduce costs since it helps decision makers identify the biggest contributors
product's cost. Managers can now then investigate on these contributing activities and control consts accordingly.
 UNIT

per item produced

per item produced
per batch setup done
per batch shipping made
per each design made
per hour of production

y the biggest contributors to a

ntrol consts accordingly.