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Dutchman Tiles is a small distributor of marble tiles. Dutchman identifies its three major activities and cost pools as ordering, receiving and storage, and shipping,
Dutchman Tiles is a small distributor of marble tiles. Dutchman identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2019: (Click the icon to view the details.) For 2019, Dutchman buys 290,000 marble tiles at an average cost of $3 per tile and sells them to retailers at an average price of $5 per tile. Assume Dutchman has no fixed costs and no inventories. Read the requirements. Requirement 1. Calculate Dutchman's operating income for 2019. Revenues Costs: Purchase cost of tiles Ordering costs Receiving and storage Shipping Total costs Operating income Data table Activity 1. Placing and paying for orders of marble tiles 2. Receiving and storage 3. Shipping of marble tiles to retailers Cost Driver Number of orders Quantity of Cost Driver Loads moved Number of shipments Cost per Unit of Cost Driver 400 $90 per order 4,900 $60 per load 2,100 $30 per shipment Requirements 1. 2. Calculate Dutchman's operating income for 2019. For 2020, retailers are demanding a 4% discount off the 2019 price. Dutchman's suppliers are only willing to give a 3% discount. Dutchman expects to sell the same quantity of marble tiles in 2020 as in 2019. If all other costs and cost-driver information remain the same, calculate Dutchman's operating income for 2020. 3. Suppose further that Dutchman decides to make changes in its ordering and receiving-and-storing practices. By placing long-run orders with its key suppliers, Dutchman expects to reduce the number of orders to 100 and the cost per order to $45 per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, Dutchman expects to reduce the number of loads moved to 4,025 and the cost per load moved to $58. Will Dutchman achieve its target operating income of $1.34 per tile in 2020? Show your calculations
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