Deco Tiles is a small distributor of marble tiles. Deco identifies its three major activities and cost pools as ordering, receiving and storage,and shipping, and it reports the following details for 2019:(Click the icon to view the details.)For 2019, Deco buys 280,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an average price of $7 per tile. AssumeDeco has no fixed costs and no inventories.Data tableActivity1. Placing and paying for orders of marble tiles2. Receiving and storage3. Shipping of marble tiles to retailersCost DriverNumber of ordersLoads movedNumber of shipmentsQuantity ofCost Driver5005,0002,200Cost per Unit ofCost Driver$80 per order$60 per load$50 per shipmentX Requirements1.2.3.Calculate Deco's operating income for 2019.For 2020, retailers are demanding a 6% discount off the 2019 price. Deco's suppliers are onlywilling to give a 5% discount. Deco expects to sell the same quantity of marble tiles in 2020 asin 2019. If all other costs and cost-driver information remain the same, calculate Deco'soperating income for 2020.Suppose further that Deco decides to make changes in its ordering and receiving-and-storingpractices. By placing long-run orders with its key suppliers, Deco expects to reduce thenumber of orders to 200 and the cost per order to $40 per order. By redesigning the layout ofthe warehouse and reconfiguring the crates in which the marble tiles are moved, Deco expectsto reduce the number of loads moved to 4,125 and the cost per load moved to $58. Will Decoachieve its target operating income of $1.96 per tile in 2020? Show your calculations.X

Operating income is the income available after paying for the cost of goods sold and operating cost…

Deco Tiles is a small distributor of marble tiles. Deco identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2019: (Click the icon to view the details.) For 2019, Deco buys 280,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an average price of $7 per tile. As Deco has no fixed costs and no inventories. Data table Activity 1. Placing and paying for orders of marble tiles 2. Receiving and storage 3. Shipping of marble tiles to retailers Cost Driver Number of orders Loads moved Number of shipments Quantity of Cost Driver 500 5,000 2,200 Cost per Unit of Cost Driver $80 per order $60 per load $50 per shipment

Deco Tiles is a small distributor of marble tiles. Deco identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2019: (Click the icon to view the details.) For 2019, Deco buys 280,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an average price of $7 per tile. As Deco has no fixed costs and no inventories. Data table Activity 1. Placing and paying for orders of marble tiles 2. Receiving and storage 3. Shipping of marble tiles to retailers Cost Driver Number of orders Loads moved Number of shipments Quantity of Cost Driver 500 5,000 2,200 Cost per Unit of Cost Driver $80 per order $60 per load $50 per shipment

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Deco Tiles is a small distributor of marble tiles. Deco identifies its three major activities and cost pools as ordering, receiving and storage,
and shipping, and it reports the following details for 2019:
(Click the icon to view the details.)
For 2019, Deco buys 280,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an average price of $7 per tile. Assume
Deco has no fixed costs and no inventories.
Data table
Activity
1. Placing and paying for orders of marble tiles
2. Receiving and storage
3. Shipping of marble tiles to retailers
Cost Driver
Number of orders
Loads moved
Number of shipments
Quantity of
Cost Driver
500
5,000
2,200
Cost per Unit of
Cost Driver
$80 per order
$60 per load
$50 per shipment
X

Requirements
1.
2.
3.
Calculate Deco's operating income for 2019.
For 2020, retailers are demanding a 6% discount off the 2019 price. Deco's suppliers are only
willing to give a 5% discount. Deco expects to sell the same quantity of marble tiles in 2020 as
in 2019. If all other costs and cost-driver information remain the same, calculate Deco's
operating income for 2020.
Suppose further that Deco decides to make changes in its ordering and receiving-and-storing
practices. By placing long-run orders with its key suppliers, Deco expects to reduce the
number of orders to 200 and the cost per order to $40 per order. By redesigning the layout of
the warehouse and reconfiguring the crates in which the marble tiles are moved, Deco expects
to reduce the number of loads moved to 4,125 and the cost per load moved to $58. Will Deco
achieve its target operating income of $1.96 per tile in 2020? Show your calculations.
X

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