please help with this problem

Activity-Based Management at BookWeb, Inc.

BookWeb, Inc., sells books and software over the Internet. A recent article in a trade journal has caught the attention of management because the company has experienced soaring inventory handling costs. The article notes that similar firms have purchasing, warehousing, and distribution costs that average 13 percent of sales. Thirteen percent is attractive to BookWeb management when compared to its results for the past year, shown in the following table. Attached photo

page 881

Book sales revenue totaled $3,900,000 and software sales revenue totaled $2,600,000. A review of th found various inefficiencies with respect to the warehousing of books and the outgoing shipments of book misplacements resulted in an extra 550 moves and software had 250 incorrect shipments.

1. What is activity-based management (as opposed to cost-based management, for examy circumstances is it useful? What is a non-value-added activity?
2. How much did non-value-added activities cost BookWeb this past year?
3. Cite at least two examples of situations that may have given rise to non-value-added activities at
4. Will the elimination of non-value-added activities allow BookWeb to achieve 13 percent as a c for each of the product lines? (Show all calculations to support your answer.)
5. Do either of the product lines require additional cost cutting to achieve the target percentages cost cutting is needed and what tools (or methods) might the company use to achieve the cuts? briefly describe them

LEM 19.7A a y-Based Management at BookWeb, Inc. Veb, Inc., sells books and software over the Internet. A recent article in a trade journal has caught the attentic ement because the company has experienced soaring inventory handling costs. The article notes that similar f purchasing, warehousing, and distribution costs that average 13 percent of sales. Thirteen percent is attractive Web management when compared to its results for the past year, shown in the following table. Cost % of Cost Driver Driver for % of Cost Driver Activity (cost) Cost Driver Quantity Books for Software Incoming receipts Number of ($300.000) purchase orders 2.000 70% 30% Warehousing Number of 80% 20% ($360.000) Inventory moves 9.000 Shipments Number of 25% ($225.000 shipments 5,000 75% page s wor the company s activit sales revenue totaledis6 - 0..040 and software sales revenue totaled s_, 600.001 ments of software, In particul LOUSIDE OF BOOKS example and