Question
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timé save time the for co 20T cting errors. Assume Calvert could use arget costs, activity-based costing. Snappy Tiles is a small distributor of marble s three major activities and cost pools as ordering, receiving and storage, and ship- Quantity of Cost per Unit of will remain at $15,000. Calculate Calvert's operating income 13-19 Target pr tiles. Sna ping,anppy identifes ping, and it reports the following details for Cost Driver Cost DriverCost Driver $50 per order $30 per load S40 per shipment Activ 500 4,000 . Placing and paying for orders of marble 2. Receiving and storage tiles Number of orders Loads moved Number of shipments 1,500 3. Shipping of marble tiles to retailers For 2016, bnappy buys 250,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an per tile. Assume Snappy has no fixed costs and no inventories. 1. Calculate Snappy's operating income for 2016. 2. For 2017, retai allers are demanding a 5% discount off the 2016 price. Snappy's suppliers are only willing iscount. Snappy expects to sell the same quantity of marble tiles in 2017 as in 2016. If all other costs and cost-driver information remain the same, calculate Snappy's operating income to give a 4% for 2017 Sales 3. Suppose further that Snappy decides to make changes in its ordering and receiving-and-storing prac- tices. By placing long-run orders with its key suppliers, Snappy expects to reduce the number of orders to 200 and the cost per order to $25 per order. By redesigning the layout of the warehouse and recon- figuring the crates in which the marble tiles are moved, Snappy expects to reduce the number of loads moved to 3,125 and the cost per load moved to $28. Will Snappy achieve its target operating income of Calculate t Did SES a . What cha vercom S0.30 per tile in 2017? Show your calculations.
Explanation / Answer
Hey,
1. This question is straightforward, just see calculation and you will understand it.
2. For 2017 Rate is changing. So Sales Price will be 4-(4*5%) = 4-0.20 = 3.8. And Variable cost that is purchasing price will be 3-(3*4%) = 3-0.12 = 2.85.
32500
3. Company wants to achieve target operating profit of 0.3 per unit so the profit required is 0.3*250000=$ 75000. Lets see if they can achive by changing the methods said in question.
Yes company is able to achieve its target operating income of 0.3 per unit.
Hope this explanation helps you understand the concept better.
Particulars Calculation Amount Sales 250000x4 1000000 Less: Variable Cost 250000x3 -750000 Gross Margin 250000 Less: Operating Expense Ordering 500x50 -25000 Receiving and storage 4000x30 -120000 Shipping 1500x40 -60000 Operating Income 45000