1. Plot logistics cost versus number of orders. What cost behaviour is evident? What do you think happened in week 14?

2. What is your recommendation to Kelly Hudsa regarding the relevance of the past 25 weeks of logistics cost and number of orders data for measuring logistics cost behaviour?

3. Hudsa remarks that one of the improvements that Super Byte has made in the past several months was to negotiate just-in-time deliveries from its suppliers. This was made possible by substituting an automated ordering system for the previous manual (labour-intensive) system. Though fixed costs increased, the variable cost of placing an order was expected to drop greatly. Do the data support this expectation? Do you believe that the change to the automated ordering system was justified? Why or why not?

Super Byte Company manufactures wireless handheld devices. Because there is intense competition in the market for these devices, understanding and using cost behaviour is critical to Super Byte’s profitability. Super Byte’s controller, Kelly Hudsa, has kept meticulous files on various cost categories and possible cost drivers for most of the important functions and activities of Super Byte. Because most of the manufacturing at Super Byte is automated, labour cost is relatively fixed. Other support costs comprise most of Super Byte’s costs. Below are partial data that Hudsa has collected on one of these support costs, logistics operations (materials purchasing, receiving, warehousing, and shipping) over the past 25 weeks.

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Week Logistics Cost Number of Orders $23,907 1,357 2 18,265 1,077 3 24,208 1,383 23,578 4 1,486 22,211 1,292 1,425 22,862 1,306 23,303 1,373 24,507 17,878 1,031 18,306 10 1,020 11 20,807 1,097 19,707 12 1,069 23,020 13 1,444 733 14 20,407 15 20,370 413 20,678 633 16 17 21,145 711 18 20,775 228 488 19 20,532 20 20,659 655 21 20,430 722 22 20,713 373 23 20,256 391 734 24 21,196 256 25 20,406