Hearthstone Appliances supplies parts for laundry and kitchen appliances. Customer orders are placed over the internet and are generally filled in one or two days using express mail services.
Angela Farnsworth, a consultant with ABA Services, has been asked to conduct an ABM Study of inventory management at Hearthstone Appliances. In this regard she has determined that the cost of filling customer's orders in the past year consisted primarily of $300,000 of salary expenses related to five workers who pick parts from the warehouse and $450,000 of salary expenses related to six workers who pack the orders for shipment, in the past year, the company filled 150,000 orders. Based on work performed for a very large chain of auto supply stores. Angela has determined a benchmark cost of $4 per order.
Required:
A) Comment on the advisability of comparing the costs of hearthstone Appliances to those at an auto supply chain store.
B) Angela has observed the following: Workers go to a box that contains individual customer order sheets. They take the bottom order (the oldest) and go into the warehouse with a handcart and a box . They then fill the order and carry the parts to a packing station. Can you suggest ways of improving this process?