management because the company has experienced soaring inventory handling costs. The article notes that similar firms have purchasing, warehousing, and distribution costs that average 13 percent of sales. Thirteen percent is attractive to BookWeb management when compared to its results for the past year, shown in the following table. Activity (cost) Incoming receipts ($300,000) Warehousing ($360,000) Shipments ($225,000) Req E1 Cost Driver Number of purchase orders Req E2 Number of inventory moves Number of shipments Cost Driver Quantity 2,000 9,000 15,000 Complete this question by entering your answers in the tabs below. Book sales revenue totaled $3,900,000 and software sales revenue totaled $2,600,000. A review of the company's activities found various inefficiencies with respect to the warehousing of books and the outgoing shipments of software. In particular, book misplacements resulted in an extra 550 moves and software had 250 incorrect shipments. 1. Do either of the product lines require additional cost cutting to achieve the target percentages? 2. How much additional cost cutting is needed to achieve the target percentages? How much additional cost cutting is needed to achieve the target percentages? dditional cost cutting $ 47,250 < Req E1 % of Cost Driver for Books 70% 80% 25% Req E2 > % of Cost Driver for Software 30% 20% 75%
management because the company has experienced soaring inventory handling costs. The article notes that similar firms have purchasing, warehousing, and distribution costs that average 13 percent of sales. Thirteen percent is attractive to BookWeb management when compared to its results for the past year, shown in the following table. Activity (cost) Incoming receipts ($300,000) Warehousing ($360,000) Shipments ($225,000) Req E1 Cost Driver Number of purchase orders Req E2 Number of inventory moves Number of shipments Cost Driver Quantity 2,000 9,000 15,000 Complete this question by entering your answers in the tabs below. Book sales revenue totaled $3,900,000 and software sales revenue totaled $2,600,000. A review of the company's activities found various inefficiencies with respect to the warehousing of books and the outgoing shipments of software. In particular, book misplacements resulted in an extra 550 moves and software had 250 incorrect shipments. 1. Do either of the product lines require additional cost cutting to achieve the target percentages? 2. How much additional cost cutting is needed to achieve the target percentages? How much additional cost cutting is needed to achieve the target percentages? dditional cost cutting $ 47,250 < Req E1 % of Cost Driver for Books 70% 80% 25% Req E2 > % of Cost Driver for Software 30% 20% 75%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please do not give image format
Transcribed Image Text:BookWeb, Inc., sells books and software over the Internet. A recent article in a trade journal has caught the attention of
management because the company has experienced soaring inventory handling costs. The article notes that similar firms
have purchasing, warehousing, and distribution costs that average 13 percent of sales. Thirteen percent is attractive to
BookWeb management when compared to its results for the past year, shown in the following table.
Activity (cost)
Incoming receipts
($300,000)
Warehousing
($360,000)
Shipments
($225,000)
Req E1
Cost Driver
Number of
purchase orders
Req E2
Number of
inventory moves
Number
of shipments
Cost Driver
Quantity
2,000
9,000
15,000
Complete this question by entering your answers in the tabs below.
-1. Do either of the product lines require additional cost cutting to achieve the target percentages?
-2. How much additional cost cutting is needed to achieve the target percentages?
Book sales revenue totaled $3,900,000 and software sales revenue totaled $2,600,000. A review of the company's
activities found various inefficiencies with respect to the warehousing of books and the outgoing shipments of software. In
particular, book misplacements resulted in an extra 550 moves and software had 250 incorrect shipments.
How much additional cost cutting is needed to achieve the target percentages?
Additional cost cutting
$
47,250
< Req E1
% of Cost
Driver for
Books
70%
80%
25%
Req E2 >
% of Cost Driver
for Software
30%
20%
75%
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