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 Cost Driver Quantity of Cost Driver Cost per Unit of Cost Driver

Purchasing Number of purchase orders $1,170$ $$167$ per order

Warehousing Number of moves $8,60036$ per move

Distributing Number of shipments $67097$ per shipment

Caldwell buys $101,700$ units at an average unit cost of $$16$ and sells them at an average unit price of $$26.$ The firm also has fixed operating costs of $$251,700$ for the year.

Caldwell$$s customers are demanding a $16\%$ discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell$$s suppliers, however, are willing to give only a $10\%$ discount.

Required:

Caldwell has estimated that it can reduce the number of purchase orders to $850$ and can decrease the cost of each shipment by $$20$ 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?