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# 9-50. Time-Driven Activity-Based Costing (LO 9-9) Meadow Logistics, Inc. (MLI) distributes food purchased in bulk to small retailers. The firm is divided into two

## 9-50. Time-Driven Activity-Based Costing (LO 9-9) Meadow Logistics, Inc. (MLI) distributes food purchased in bulk to small retailers. The firm is divided into two divisions: Purchasing and Distribution. Purchasing is responsible for ordering goods from the manufacturer, receiving them, and then moving them to the appropriate location in the warehouse. Distribution is responsible for taking orders from retailers, picking the products from the warehouse for the orders, and packaging the orders for shipment. MLI has a policy of filling every order on the day of the order. If the firm is out of a particular item, it will ship a partial order and complete the order when the item is back in stock. Occasionally, an order will not have to be packaged if the retailer chooses to take delivery at the MLI loading dock. Distribution has 20 employees who are responsible for the activities, and all 20 are trained to handle any of the three tasks. Each of these employees works 40 hours per week for 50 weeks. There is an allowance of 18 percent of the employees' time for training and other administrative tasks. The total costs of distribution for the coming year are estimated to be $885,600. When asked, the manager of Distribution estimated the following times for each of the three activities: . Taking orders: 8 minutes. . Picking orders: 12 minutes. . Packaging orders: 15 minutes. During the year, Distribution received 42,000 orders. Because of out-of-stock events, pickers had to pick 49,000 orders; 39,500 orders were packaged. 9-70. Time-Based ABC: Time Equations (LO 9.9) Refer to Exercise 9-50. Until now, Meadow Logistics, Inc. (MLI) has used a commercial vendor to ship orders. The manager of Distribution believes the system described in Exercise 9-50 is too simple in two ways. First, if a retailer is ordering from MLI for the first time, Distribution has to take time to verify the retailer details (shipping address, credit, and so on). The manager estimates this additional time to total 20 minutes. In addition, some orders are quite complex. This happens when a retailer orders many different items in one order. The manager estimates that a complex order takes an additional 30 minutes to pick, on average. Required a. Write out the time equation for taking an order. b. Write out the time equation for picking an order. Using the data from Exercise 9-50 and the additional data here, compute the cost of filling a complex order from a new retailer. Assume that all of the items in the order are in stock and that the retailer will not pick the order up at the MLI loading dock. 9-50. Time-Driven Activity-Based Costing (LO 9-9) Meadow Logistics, Inc. (MLI) distributes food purchased in bulk to small retailers. The firm is divided into two divisions: Purchasing and Distribution. Purchasing is responsible for ordering goods from the manufacturer, receiving them, and then moving them to the appropriate location in the warehouse. Distribution is responsible for taking orders from retailers, picking the products from the warehouse for the orders, and packaging the orders for shipment. MLI has a policy of filling every order on the day of the order. If the firm is out of a particular item, it will ship a partial order and complete the order when the item is back in stock. Occasionally, an order will not have to be packaged if the retailer chooses to take delivery at the MLI loading dock. Distribution has 20 employees who are responsible for the activities, and all 20 are trained to handle any of the three tasks. Each of these employees works 40 hours per week for 50 weeks. There is an allowance of 18 percent of the employees' time for training and other administrative tasks. The total costs of distribution for the coming year are estimated to be $885,600. When asked, the manager of Distribution estimated the following times for each of the three activities: . Taking orders: 8 minutes. . Picking orders: 12 minutes. . Packaging orders: 15 minutes. During the year, Distribution received 42,000 orders. Because of out-of-stock events, pickers had to pick 49,000 orders; 39,500 orders were packaged. 9-70. Time-Based ABC: Time Equations (LO 9.9) Refer to Exercise 9-50. Until now, Meadow Logistics, Inc. (MLI) has used a commercial vendor to ship orders. The manager of Distribution believes the system described in Exercise 9-50 is too simple in two ways. First, if a retailer is ordering from MLI for the first time, Distribution has to take time to verify the retailer details (shipping address, credit, and so on). The manager estimates this additional time to total 20 minutes. In addition, some orders are quite complex. This happens when a retailer orders many different items in one order. The manager estimates that a complex order takes an additional 30 minutes to pick, on average. Required a. Write out the time equation for taking an order. b. Write out the time equation for picking an order. Using the data from Exercise 9-50 and the additional data here, compute the cost of filling a complex order from a new retailer. Assume that all of the items in the order are in stock and that the retailer will not pick the order up at the MLI loading dock.

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To solve the given tasks a Write out the time equation for taking an order The original time for taking an order is 8 minutes If the order is from a n...### Get Instant Access to Expert-Tailored Solutions

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