Pastel Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small…

Pastel 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: Pastel Bags Budget for Costs and Activities For the Year Ended February 28, 2017 Direct materials-purses ……………………………………… $ 319,155 Direct materials-backpacks …………………………………. 454,995 Direct manufacturing labor-purses …………………………. 99,000 Direct manufacturing labor-backpacks …………………….. 113,000 Setup ………………………………………………………….. 64,000 Shipping ………………………………………………………. 73,000 Design ………………………………………………………… 169,000 Plant utilities and administration …………………………….. 221,000 Total…………………………………………………………… $1,513,150 O

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