Gaston Inc. is a small distributor of mechanical pencils. Gaston identifies its three major activities and...

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Gaston Inc. is a small distributor of mechanical pencils. Gaston identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2016: Data Table Quantity of Cost per Unit Activity Cost Driver Cost Driver of Cost Driver 1. Placing and paying for orders of pencil packs Number of orders 800 $100 per order 2. Receiving and storage Loads moved 5,000 $60 per load 3. Shipping of pencil packs to retailers Number of shipments 1,500 $70 per shipment Print Done - X Reference Total Per Unit $ 2,750,000 $ 11.00 Revenues Costs: Purchase cost of pencils 1,000,000 4.00 Ordering costs 80,000 0.32 Receiving and storage 300,000 1.20 105,000 0.42 Shipping Total costs 1,485,000 5.94 $ 1,265,000 $ 5.06 Operating income Print Done - X i More Info For 2016, Gaston buys 250,000 pencil packs at an average cost of $4 per pack and sells them to retailers at an average price of $11 per pack. Assume Gaston has no fixed costs and no inventories. For 2017, retailers are demanding a 6% discount off the 2016 price. Gaston's suppliers are only willing to give a 5% discount. Gaston expects to sell the same quantity of pencil packs in 2017 as it did in 2016. Print Done First, determine the selling price to retailers in 2017. The selling price per pack to retailers in 2017 is $ 10.34 Now determine the purchase price per packs of pencils in 2017. The purchase price per pack in 2017 is $ 3.8 Now that we have determined the new selling price and purchase price for 2017, determine the operating income for 2017. Then, calculate the per unit amounts for 2017. (Round the per unit amounts to the nearest cent.) Total Per Unit Revenues Costs: Purchase cost of pencil packs Ordering costs Receiving and storage Shipping Total costs Operating income How much must Gaston reduce its total cost and cost per unit if it is to earn the same target operating income in 2017 as it earned in 2016 (and thereby earn its required rate of return on investment). In referring to the 2016 operating income, Gaston will need to reduce its total costs by $ or $ per unit if it is to achieve its target operating income in 2017. Gaston Inc. is a small distributor of mechanical pencils. Gaston identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2016: Data Table Quantity of Cost per Unit Activity Cost Driver Cost Driver of Cost Driver 1. Placing and paying for orders of pencil packs Number of orders 800 $100 per order 2. Receiving and storage Loads moved 5,000 $60 per load 3. Shipping of pencil packs to retailers Number of shipments 1,500 $70 per shipment Print Done - X Reference Total Per Unit $ 2,750,000 $ 11.00 Revenues Costs: Purchase cost of pencils 1,000,000 4.00 Ordering costs 80,000 0.32 Receiving and storage 300,000 1.20 105,000 0.42 Shipping Total costs 1,485,000 5.94 $ 1,265,000 $ 5.06 Operating income Print Done - X i More Info For 2016, Gaston buys 250,000 pencil packs at an average cost of $4 per pack and sells them to retailers at an average price of $11 per pack. Assume Gaston has no fixed costs and no inventories. For 2017, retailers are demanding a 6% discount off the 2016 price. Gaston's suppliers are only willing to give a 5% discount. Gaston expects to sell the same quantity of pencil packs in 2017 as it did in 2016. Print Done First, determine the selling price to retailers in 2017. The selling price per pack to retailers in 2017 is $ 10.34 Now determine the purchase price per packs of pencils in 2017. The purchase price per pack in 2017 is $ 3.8 Now that we have determined the new selling price and purchase price for 2017, determine the operating income for 2017. Then, calculate the per unit amounts for 2017. (Round the per unit amounts to the nearest cent.) Total Per Unit Revenues Costs: Purchase cost of pencil packs Ordering costs Receiving and storage Shipping Total costs Operating income How much must Gaston reduce its total cost and cost per unit if it is to earn the same target operating income in 2017 as it earned in 2016 (and thereby earn its required rate of return on investment). In referring to the 2016 operating income, Gaston will need to reduce its total costs by $ or $ per unit if it is to achieve its target operating income in 2017.

Answer rating: 100% (QA)

1 Selling Price per pack to Retailer for 2017 Particulars Amount Selling Price per pack to retailer ... View the full answer