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Answer: A: Per Product SKU Allocation Rate Per Machine Hour Allocation Rate Per Direct Labor Hour Allocation Rate Per Product Pallet Allocation Rate Per Square
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A:
Per Product SKU Allocation Rate | |
Per Machine Hour Allocation Rate | |
Per Direct Labor Hour Allocation Rate | |
Per Product Pallet Allocation Rate | |
Per Square Foot Allocation Rate | |
Per Customer Order Allocation Rate |
Information:
Potential Overhead Sources | Expected Annual Cost | Description | |||||
Maintenance of robotic helpers | $ 1,485,900 | The fleet of robots that help our stocking and picking efforts require weekly maintenance in order to keep them running correctly. | |||||
Property taxes | $ 1,744,400 | Our fulfillment center is quite large, and as a result we pay a considerable amount of property taxes to the local municipality. The property taxes we pay are decided once per year by an assessment process that the city controls. | |||||
Maintenance and repairs of shipping vans | $ 3,842,800 | A fleet of shipping vans delivers customer orders, and these vans need periodic maintenance and repairs. Shipping vans have scheduled maintenance every 5,000 miles, and our average customer delivery has around half a mile of driving distance. | |||||
Packing supplies | $ 1,765,100 | The company needs a wide array of cardboard boxes, packing tape, and box filler material in order to fulfill orders for our many products. We have a sophisticated planning system that ensures that the packing supplies we have on hand every day are sufficient to meet the upcoming needs of our customers. | |||||
Break room costs | $ 236,700 | When our workers are on break we offer them several perks in the break room, including free coffee and snacks, as well as a set of massage chairs. When we have busy periods it is clear that the amount of coffee and snacks that are consumed increases dramatically. | |||||
Depreciation of shelving | $ 699,500 | The cost of the shelving, and it's surprisingly short useful life, combine to cause substantial annual depreciation. | |||||
Management salaries | $ 1,741,000 | We employ several managers who spend their time scheduling workers, interviewing new hires, and managing any issues that arise in the fulfillment center. For the past several years our management team has remained stable, and other than small cost of living adjustments to their salaries we have not seen any increase in their costs. | |||||
Climate control system maintenance | $ 305,000 | Keeping the inside of our fulfillment center warm in the winter and cool in the summer requires complicated heating and cooling equipment that adds some cost to our operations. The maintenance of our climate control system happens once every 3 months. | |||||
Cellular phone contracts | $ 34,200 | Procurement specialists need to be reachable, both by their managers and the customers that they work with. The company buys unlimited cellular phone plans for our procurement specialists so that they do not need to worry about data usage or talk time. | |||||
Robot disposal | $ 23,600 | When robots fail many of their parts are hazardous and need to be carefully disposed of, which adds considerably to their cost. Because of our excellent maintenance workers very few robots need to be disposed of, and when they do it is usually because of how many years they have been in service, not how many miles they have traveled. | |||||
Stocking equipment maintenance | $ 69,500 | When a pallet is unpacked so that it individual items can be accessed, we use equipment to facilitate the process. The equipment that we use to break down pallets is automatically maintained after every 350 pallet unpacking operations. | |||||
Travel and entertainment | $ 990,700 | Our procurement specialists will often travel to potential suppliers who are too far to reach by car, and will often incur costs in order to entertain their clients. We set the travel budget in order to ensure that all of our suppliers are visited once every year or two. | |||||
Picker appreciation plan | $ 45,800 | We incentivise employees to perform at their best by offering recognition and a small bonus to the most productive workers each month. During busier months the amount of the awards we give to the most productive employees rises, as do the number of categories we give awards for. | |||||
Company car maintenance | $ 713,100 | In order to manage relationships with the companies that sell on our marketplace we maintain a fleet of vehicles that procurement specialists can use to visit with suppliers. The number of cars we maintain in our fleet is small, and the intensity of the maintenance generally does not change considerably during the year. | |||||
Purchase order clerical costs | $ 981,700 | The constant maintenance of stock levels in the many products we offer, and the costs of keeping a record of our purchases of those products requires expenses for wages, computers, and software. As customer demand increases ahead of the holidays or other busier times the costs we see from purchasing products increases substantially. | |||||
Online Advertisements | $ 2,057,800 | The company regularly runs targeted keyword advertising on major search engines. The company usually runs more advertisements during busy periods of the year. | |||||
Workers compensation insurance | $ 3,049,500 | Sometimes our workers are injured on the job. When this happens our regular payments into a workers compensation insurance plan allow them to receive support during the time that they cannot work. We pay into the workers compensation insurance plan based on the total cost of employee wages, and we must pay into the plan for both our year-round staff and the extra help we bring in during busier times. | |||||
Depreciation of robotic helpers | $ 1,938,800 | Our upfront investment in the stocking and picking robots means that we see substantial annual depreciation expenses. | |||||
Picker training | $ 1,846,900 | The workers who pick the products for our customer orders receive extensive training in order to help them safely execute their jobs, which can be very physically taxing. The company changes the amount and intensity of our picker training courses as the number of pickers changes during the year. | |||||
Maintenance of shelving | $ 528,300 | The heavy duty shelving that stores the pallets of products that arrive at the fulfillment center sometimes break and need to be repaired. Most of the wear and tear on the shelving occurs when pallets need to be taken down from or loaded onto to the shelves. | |||||
Electricity costs | $ 109,800 | Our warehouse has substantial electrical requirements, mostly to maintain a favorable climate for the goods that are stored there, and to light the space. Our electricity bill has both a significant fixed and a significant variable component. | |||||
Shipping department scheduling costs | $ 346,600 | Determining the daily route of each shipping van is accomplished through a computer system that is periodically maintained and improved. We usually update the shipping department scheduling software during April each year. | |||||
Forklift maintenance | $ 267,300 | The forklifts that transport pallets between the receiving area and the stocking area need regular maintenance in order to operate well. Forklifts are maintained by our in-house technician after every 500 hours of use. During quiet periods some of our fleet remains idle, so drivers must track which forklift they use, and how long they used it each day. | |||||
Wages of cleaning staff | $ 506,200 | During the night shift a team of cleaners sweep the warehouse floor and ensure that no hazards exist that could jeopardize worker safety. We hire the same team of cleaners year-round. | |||||
Robot testing and programming | $ 998,500 | Maintaining the software that allows the robots to be so helpful for both stocking and picking is a constant effort. The team that works on our robot software sees fairly consistent expenses each year. | |||||
Conveyor belt maintenance | $ 427,300 | After the items have been packed into boxes, a conveyor belt system transports them to the correct shipping van. The high speed conveyor belt wears down faster when more boxes are distributed using it. | |||||
Financial Statement Audit Costs | $ 601,900 | Every year the company hires outside auditors to ensure that our financial statements faithfully reflect the financial results and position of the company. | |||||
Strategic planning | $ 1,937,300 | Determining which products we should include on our website takes significant effort, since both past sales data and future trends need to be considered. The marketing and strategy team works at a consistent pace year round. | |||||
Other Forecasted Information | Forecast | units | Regression Information | ||||
Number of product stock keeping units (SKU) | 16,430 | SKUs | Intercept Estimate | $ 9,934 | |||
Number of semi-autonomous machine hours | 183,427 | hours per year | Standard Error | $ 514 | |||
Number of direct labor hours | 198,973 | hours per year | Slope Small | $ 0.034 | |||
Number of product pallets received | 31,995 | pallets per year | Standard Error | $ 0.131 | |||
Number of customer orders | 1,472,128 | orders per year | Slope Large | $ 0.190 | |||
Fulfillment center square footage | 88,700 | sq. ft. | Standard Error | $ 0.001 | |||
Square footage of procurement | 2,100 | sq. ft. | |||||
Square footage of receiving and stocking | 22,500 | sq. ft. | |||||
Square footage of picking | 60,800 | sq. ft. | Investment Information | ||||
Square footage of shipping | 3,300 | sq. ft. | Initial Cost | $ 7,500,000 | dollars | ||
Direct labor costs | $ 15.90 | dollars per hour | Discount Rate | 18.90% | percent per year | ||
Average small product direct material costs | $ 11.40 | dollars per unit | Useful Life | 5 | years | ||
Average large product direct material costs | $ 37.23 | dollars per unit | Salvage Value | $ 67,500 | dollars | ||
Small product orders per SKU | 105 | orders per year per SKU | Tax Rate | 26.80% | percent | ||
Large product orders per SKU | 70 | orders per year per SKU | Working Capital | $ 514,600 | dollars | ||
Percent of customer orders that are small | 56.0% | percent | |||||
Small product items per pallet | 103 | items | |||||
Large product items per pallet | 27 | items | |||||
Small product average price | $ 24.19 | dollars per item | |||||
Procurement | Stocking | Picking | Shipping | units | |||
Small product labor time | 0.00 | 0.035 | 0.048 | 0.024 | hours | ||
Large product labor time | 0.00 | 0.062 | 0.080 | 0.029 | hours | ||
Small product machine time | 0.00 | 0.040 | 0.045 | 0.000 | hours | ||
Large product machine time | 0.00 | 0.094 | 0.081 | 0.000 | hours |
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