Bright Tiles is a small distributor of marble tiles. Bright identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2012:

For 2012, Bright buys 300,000 marble tiles at an average cost of $ 4 per tile and sells them to retailers at an average price of $ 7 per tile. Assume Bright has no fixed costs and no inventories.

Required
1. Calculate Bright’s operating income for 2012.
2. For 2013, retailers are demanding a 5% discount off the 2012 price. Bright’s suppliers are only willing to give a 4% discount. Bright expects to sell the same quantity of marble tiles in 2013 as in 2012. If all other costs and cost- driver information remain the same, calculate Bright’s operating income for 2013.
3. Suppose further that Bright decides to make changes in its ordering and receiving- and- storing practices. By placing long- run orders with its key suppliers, Bright expects to reduce the number of orders to 500 and the cost to $ 35 per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, Bright expects to reduce the number of loads moved to 4,125 and the cost per load moved to $ 38. Will Bright achieve its target operating income of $ 1.92 per tile in 2013? Show yourcalculations.

Transcribed Image Text:

Cost per Unit Activity Cost Driver 1. Placing and paying for orders of marble tiles 2. Receiving and storage 3. Shipping of marble tiles to retailers Number of orders Loads moved Number of shipments Quantity of Cost Driver 800 5,000 2,200 of Cost Driver $70 per order $40 per load $50 per shipment