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:

Caldwell buys $100,300$ units at an average unit cost of $$13$ and sells them at an average unit price of $$23.$

The firm also has fixed operating costs of $$250,300$ for the year.

Caldwell's customers are demanding a $13\%$ 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 $6\%$ discount.

Required:

Caldwell has estimated that it can reduce the number of purchase orders to $710$ and can decrease the cost

of each shipment by $$6$ 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?