Question: Snappy Tiles is a small distributor of marble tiles. Snappy idetifies its three mahor activities and cost pools as ordering, receiving and storagem, and shopping, and reports the following details for 2003:
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Quantity of |
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Cost per Unit of |
| Activity |
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Cost Driver |
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Cost Driver |
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Cost Driver |
| 1. Placing and paying for |
Number of orders |
500 |
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$50 per order |
| orders of mable tiles |
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| 2. Receiving and storage |
Loads moved |
4,000 |
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$30 per load |
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| 3. Shipping of marble tiles to |
Number of shipments |
1,500 |
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$40 per shipment |
| retailers |
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Snappy buy 250,000 marble tiles at an average cosgt of $3 per tile and sells them to retilers at an average price of $4 per tile. Assume Snappy has no fixed costs.
1. Calculate Snappy's operating income for 2003
2. For 2004, retailers are demanding a 5% discount off the 2003 price. Snappy's suppliers are only willing to give a 4% discount. Snappy expects to sell the same quantity of mable tiles in 2004 as in 2003. If all other costs and cost-driver information remain the same, calculate Snappy's operating income for 2004.
3. Suppose further that Snappy decides to omake changes in its ordering and receving amd storing practices. By placing long-run orders with its key suppliers, Snappy expects to r dduve the number of orders to 200 and the cost per order to $25 per order. By redsigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are mopved to $28. Will Snappy achieve its targe operating income of $0.30 per tile in 2004? Show calculations.