5 Activity-based management; cost cutting: retailer LO 16.2 Brainfodder.net.au sells books and software over the internet. A recent article in a trade journal has caught the attention of management, given that the company has experienced soaring inventory-handling costs. The article noted that similar firms have purchasing, warehousing and distribution costs that average 13 per cent of sales, which is attractive when compared with Brainfodder.net.au's results for the past year. The following information is available: Activity (Cost) Incoming receipts ($600 000) Cost driver Cost driver quantity Percentage of cost driver activity for books Percentage of cost driver activity Number of purchase orders 2 000 70% for software 30% Warehousing ($720 000) Outgoing shipments ($450 000) Number of inventory moves Number of shipments 9 000 80 20 15 000 25 75 Book sales totalled $7 800 000 and software sales totalled $5 200 000. A review of the company's activities found various inefficiencies with respect to the warehousing of books and outgoing shipments of software. These inefficiencies resulted in an extra 550 inventory moves and 250 shipments, respectively.