Type or pas

Data table

Activity		Cost Driver	Quantity of Cost Driver	Cost per Unit of Cost Driver
1.	Placing and paying for orders of marble tiles	Number of orders	700	$80 per order
2.	Receiving and storage	Loads moved	4,100	$50 per load
3.	Shipping of marble tiles to retailers	Number of shipments	1,700	$70 per shipment

Requirements

1.	Calculate Deco's operating income for 2016.
2.	For 2017, retailers are demanding a 5% discount off the 2016 price. Deco's suppliers are only willing to give a 4% discount. Deco expects to sell the same quantity of marble tiles in 2017 as in 2016. If all other costs and cost-driver information remain the same, calculate Deco's operating income for 2017.
3.	Suppose further that Deco decides to make changes in its ordering and receiving-and-storing practices. By placing long-run orders with its key suppliers, Deco expects to reduce the number of orders to 400 and the cost per order to $40 per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, Deco expects to reduce the number of loads moved to 3,225 and the cost per load moved to $48. Will Deco achieve its target operating income of $0.94 per tile in 2017? Show your calculations.

For

2016,

Deco

buys

240,000

marble tiles at an average cost of

$4

per tile and sells them to retailers at an average price of

$6

per tile. Assume

Deco

has no fixed costs and no inventories.

Requirement 1. Calculate

Deco's

operating income for

2016.

Revenues		$1,440,000
Costs:
Purchase cost of tiles	$960,000
Ordering costs	56,000
Receiving and storage	205,000
Shipping	119,000
Total costs		1,340,000
Operating income		$100,000

Part 2

Requirement 2. For

2017,

retailers are demanding a

5%

discount off the

2016

price.

Deco's

suppliers are only willing to give a

4%

discount.

Deco

expects to sell the same quantity of marble tiles in

2017

as in

2016.

If all other costs and cost-driver information remain the same, calculate

Deco's

operating income for

2017.

Revenues		$1,368,000
Costs:
Purchase cost of tiles	$921,600
Ordering costs	56,000
Receiving and storage	205,000
Shipping	119,000
Total costs		1,301,600
Operating income		$66,400

Part 3

Requirement 3. Suppose further that

Deco

decides to make changes in its ordering and receiving-and-storing practices. By placing long-run orders with its key suppliers,

Deco

expects to reduce the number of orders to

400

and the cost per order to

$40

per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved,

Deco

expects to reduce the number of loads moved to

3,225

and the cost per load moved to

$48.

Will

Deco

achieve its target operating income of

$0.94

per tile in

2017?

Show your calculations.

Begin by calculating

Deco's

operating income, then the per unit amounts if the company makes these changes. (Round the per unit amounts to the nearest cent.)

		Total
Revenues		$1,368,000
Costs:
Purchase cost of tiles	$921,600
Ordering costs	16,000
Receiving and storage	154,800
Shipping	119,000
Total costs		1,211,400
Operating income		$156,600

Per Unit

$5.70

3.84

0.07

0.65

0.50

5.06

$0.64

Part 4

Deco

will not be able

to achieve its target operating income of

$0.94

per tile in

2017.

ABOVE IS AN EXAMPLE USE THESE NUMBERS PLEASE

Data table

Activity		Cost Driver	Quantity of Cost Driver	Cost per Unit of Cost Driver
1.	Placing and paying for orders of marble tiles	Number of orders	900	$70 per order
2.	Receiving and storage	Loads moved	4,800	$60 per load
3.	Shipping of marble tiles to retailers	Number of shipments	2,300	$50 per shipment

For

2016,

Dutchman

buys

290,000

marble tiles at an average cost of

$3

per tile and sells them to retailers at an average price of

$6

per tile. Assume

Dutchman

has no fixed costs and no inventories.

Requirements

1.	Calculate Dutchman's operating income for 2016.
2.	For 2017, retailers are demanding a 6% discount off the 2016 price. Dutchman's suppliers are only willing to give a 4% discount. Dutchman expects to sell the same quantity of marble tiles in 2017 as in 2016. If all other costs and cost-driver information remain the same, calculate Dutchman's operating income for 2017.
3.	Suppose further that Dutchman decides to make changes in its ordering and receiving-and-storing practices. By placing long-run orders with its key suppliers, Dutchman expects to reduce the number of orders to 600 and the cost per order to $35 per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, Dutchman expects to reduce the number of loads moved to 3,925 and the cost per load moved to $58. Will Dutchman achieve its target operating income of $1.20 per tile in 2017? Show your calculations.

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