9 (Chapter 13) 0 Saved Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed: Activity Purchasing Warehousing Distributing Cost Driver Number of purchase orders Number of moves Number of shipments Quantity of Cost per Unit of Cost Cost Driver Driver 1,160 $ 166 per order 8,500 35 per move 660 96 per shipment Caldwell buys 101,600 units at an average unit cost of $15 and sells them at an average unit price of $25. The firm also has fixed operating costs of $251,600 for the year. Caldwell's customers are demanding a 15% 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 8% discount. Required: Caldwell has estimated that it can reduce the number of purchase orders to 840 and can decrease the cost of each shipment by $19 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? Maximum cost