=+ Two warehouses currently used for steel bar storage would no longer be needed. Marjack rents one

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=+◗ Two warehouses currently used for steel bar storage would no longer be needed. Marjack rents one warehouse from another company under a cancellable leasing arrangement at an annual cost of $85000. The other warehouse is owned by Marjack and contains 10000 square metres. Three-quarters of the space in the owned warehouse could be rented for $3.50 per square metre per year. Insurance costs totalling $11500 per year would be eliminated.

Marjack’s required rate of return on investment is 15% per year. Marjack’s budgeted income statement for the year ending 31 December 2015 (in thousands) is as follows:

Revenues (900 000 units) $10 800 Cost of goods sold Variable costs $4 050 Fixed costs 1 450 Total costs of goods sold 5 500 Gross margin 5 300 Marketing and distribution costs Variable costs $900 Fixed costs 1 500 Total marketing and distribution costs 2 400 Operating profit $2 900 Required 1 Calculate the estimated dollar savings (loss) for Marjack Ltd that would result in 2015 from the adoption of JIT purchasing.

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Cost Accounting A Managerial Emphasis

ISBN: 9781442563377

2nd Edition

Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan

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