Gaston Inc. is a small distributor of mechanical pencils. Gaston identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2019: (Click the icon to view the activity and cost pool details.) (Click the icon to view additional information.) Will Gastonachieve its target operating income of $320,000 and its target operating income per unit of $1.28 per pencil pack in 2020Show your calculations. First, determine the selling price to retailers in 2020. The selling price per pack to retailers in 2020 is Data table Activity 1. Placing and paying for orders of pencil packs Cost Driver Number of orders Quantity of Cost per Unit of Cost Cost Driver Driver 2. Receiving and storage Loads moved 700 $100 per order 4,000 $60 per load 3. Shipping of pencil packs to retailers Number of shipments 1,500 $80 per shipment More info For 2019, Gaston buys 250,000 pencil packs at an average cost of $5 per pack and sells them to retailers at an average price of $8 per pack. Assume Gaston has no fixed costs and no inventories. For 2020, retailers are demanding a 5% discount off the 2019 price. Gaston's suppliers are only willing to give a 4% discount. Gaston expects to sell the same quantity of pencil packs in 2020 as it did in 2019. Using value engineering, Gaston decides to make changes in its ordering and receiving-and-storing practices. By placing long-run orders with its key suppliers, Gaston expects to reduce the number of orders to 500 and the cost per order to $50. By redesigning the layout of the warehouse and reconfiguring the crates in which the pencil packs are moved, Gaston expects to reduce the number of loads moved to 3,500 and the cost per load moved to $50. - ☑

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 9EA: The cost data for Evencoat Paint for the year 2019 is as follows: Using the high-low method, express...