Pagnol-Carrelages SNC is a small distributor of marble tiles. Pagnol-Carrelages identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and reports the following details for 2015: Pagnol-Carrelages buys 250 000 marble tiles at an
Pagnol-Carrelages buys 250 000 marble tiles at an average cost of ¬3 per tile and sells them to retailers at an average price of ¬4 per tile. Fixed costs are ¬40 000.
1. Calculate Pagnol-Carrelages' operating profit for 2015.
2. For 2016, retailers are demanding a 5% discount off the 2015 price. Pagnol-Carrelages' suppliers are only willing to give a 4% discount. Pagnol-Carrelages expects to sell the same quantity of marble tiles in 2016 as it did in 2015. If all other costs and cost driver information remain the same, what will Pagnol-Carrelages' operating profit be in 2016?
3. Suppose further that Pagnol-Carrelages decides to make changes in its ordering, and receiving and storing practices. By placing long-term orders with its key suppliers, it expects to reduce the number of orders to 200 and the cost per order to ¬25. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, Pagnol-Carrelages expects to reduce the number of loads moved to 3125 and the cost per load moved to ¬28. Will Pagnol-Carrelages achieve its target operating profit of ¬0.30 per tile in 2016? Show your calculations.
Quantity of Cost per unit of cost driver Activity 1 Placing and paying for cost driver Number of orders Number of loads moved Cost driver 50 per order 30 per load 500 orders of marble tiles 2 Receiving and storage 3 Shipping of marble Number of shipments 40 per shipment 1500 tiles to retailers
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1 Pagnol Carrelages s operating income in 2015 is as follows Total for Per unit 250 000 tiles 1 2 1 …View the full answer
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