Quantity of Cost PER Unit of Cost Activity Cost Driver Cost Driver DRIVEMY Purchasing Number Of purchase order's 1 , 198 $ 159 Per Order Warehousing*...

Caldwell buys 101,900 units at an average unit cost of $18 and sells them at an average unit price of $28. The firm also has fixed operating costs of $251,900 for the year.

Caldwell's customers are demanding a 18% discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a 12% discount.

Required:

Caldwell has estimated that it can reduce the number of purchase orders to 870 and can decrease the cost of each shipment by $22 with minor changes in its operations. Any further cost savings must come from reengineering the warehousing processes. What is the maximum cost (i.e., target cost) for warehousing if the firm desires to earn the same amount of profit next year?

Quantity of Cost PER Unit of CostActivityCost DriverCost DriverDRIVEMYPurchasingNumber Of purchase order's1 , 198$ 159 Per OrderWarehousing*Number of moves& , BBB38 PER MOVEDistributingNumber Of shipments59095 per Shipment