Caldwell Supply, a wholesaler, has determined thats its operations have three primary activities- purchasing, warehousing, and distributing. The firm reports the following operational data for the year just compelted: Activity Cost Driver Quanity of Cost Driver Cost Per Unit of Cost Driver Purchasing # of purchase orders 1,160 $166 per order Warehousing # of moves 8,500 $35 per move Distributing # of shipments 660 $96per shipment Caldwell buys 101,600 units at an average unit cost of $15 and sells them at an average unit price of $25. The firm also has fixed operating costs of $251,600 for the year. Caldwels customers are demanding a 15% discount for the coming year. The company expects to the sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 8% discount. Required: 1. Caldwell has estimated that it can reduce the number of purschase orders to 840 and can decrease the cost of each shipment by $19 with minor changes in its operations. Any further cost savings must come from reenginerring the warehouse processes. What is the target cost (maximun cost) for warehousing if the firm desires to earn the same amount of profit next year?
Caldwell Supply, a wholesaler, has determined thats its operations have three primary activities- purchasing, warehousing, and distributing. The firm reports the following operational data for the year just compelted:
| Activity | Cost Driver | Quanity of Cost Driver | Cost Per Unit of Cost Driver |
| Purchasing | # of purchase orders | 1,160 | $166 per order |
| Warehousing | # of moves | 8,500 | $35 per move |
| Distributing | # of shipments | 660 | $96per shipment |
Caldwell buys 101,600 units at an average unit cost of $15 and sells them at an average unit price of $25. The firm also has fixed operating costs of $251,600 for the year. Caldwels customers are demanding a 15% discount for the coming year. The company expects to the sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 8% discount.
Required:
1. Caldwell has estimated that it can reduce the number of purschase orders to 840 and can decrease the cost of each shipment by $19 with minor changes in its operations. Any further cost savings must come from reenginerring the warehouse processes. What is the target cost (maximun cost) for warehousing if the firm desires to earn the same amount of profit next year?
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