BookWeb, Inc., sells books and software over the Internet. A recent article in a trade journal has caught the attention of management because the company has experienced soaring inventory handling costs. The article notes that similar firms have purchasing, warehousing, and distribution costs that average 13 percent of sales. Thirteen percent is attractive to BookWeb management when compared to its results for the past year, shown in the following table. Activity (cost) Incoming receipts ($300,000) Warehousing ($360,000) Shipments ($225,000) Cost Driver Number of purchase orders Number of inventory moves Number of shipments Cost Driver Quantity 2,000 9,000 15,000 % of Cost Driver for Books 70% 80 25 % of Cost Driver for Software 30% 20 75 Book sales revenue totaled $3,900,000 and software sales revenue totaled $2,600,000. A review of the company's activities found various inefficiencies with respect to the warehousing of books and the outgoing shipments of software. In particular, book misplacements resulted in an extra 550 moves and software had 250 incorrect shipments.
BookWeb, Inc., sells books and software over the Internet. A recent article in a trade journal has caught the attention of management because the company has experienced soaring inventory handling costs. The article notes that similar firms have purchasing, warehousing, and distribution costs that average 13 percent of sales. Thirteen percent is attractive to BookWeb management when compared to its results for the past year, shown in the following table. Activity (cost) Incoming receipts ($300,000) Warehousing ($360,000) Shipments ($225,000) Cost Driver Number of purchase orders Number of inventory moves Number of shipments Cost Driver Quantity 2,000 9,000 15,000 % of Cost Driver for Books 70% 80 25 % of Cost Driver for Software 30% 20 75 Book sales revenue totaled $3,900,000 and software sales revenue totaled $2,600,000. A review of the company's activities found various inefficiencies with respect to the warehousing of books and the outgoing shipments of software. In particular, book misplacements resulted in an extra 550 moves and software had 250 incorrect shipments.
College Accounting (Book Only): A Career Approach
12th Edition
ISBN:9781305084087
Author:Cathy J. Scott
Publisher:Cathy J. Scott
Chapter12: Financial Statements, Closing Entries, And Reversing Entries
Section: Chapter Questions
Problem 1A: Costco is the largest chain of membership warehouse clubs in the world based on sales volume, and it...
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