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 2016:

For 2016, Dutchman buys 210,000 marble tiles at an average cost of $2 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 requirements2.

Requirement 1. Calculate Dutchman's operating income for 2016.

Revenues
Costs:
Purchase cost of tiles
Ordering costs
Receiving and storage
Shipping
Total costs
Operating income

Requirement 2. For 2017, retailers are demanding a 6% discount off the 2016 price. Dutchman's suppliers are only willing to give a 4% discount. Dutchman expects to sell the same quantity of marble tiles in 2017 as in 2016. If all other costs and cost-driver information remain the same, calculate Dutchman's operating income for 2017.

Revenues
Costs:
Purchase cost of tiles
Ordering costs
Receiving and storage
Shipping
Total costs
Operating income

Requirement 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 500 and the cost per order to $30 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 $38. Will Dutchman achieve its target operating income of $1.25 per tile in 2017?

Show your calculations. Begin by calculating Dutchman's operating income, then the per unit amounts if the company makes these changes. (Round the per unit amounts to the nearest cent.)

		Total
Revenues
Costs:
Purchase cost of tiles
Ordering costs
Receiving and storage
Shipping
Total costs
Operating income

Per Unit

Dutchman (1) to achieve its target operating income of $1.25 per tile in2017.

1: Data Table

Activity		Cost Driver	Quantity of Cost Driver	Cost per Unit of Cost Driver
1.	Placing and paying for orders of marble tiles	Number of orders	800	$60 per order
2.	Receiving and storage	Loads moved	4,900	$40 per load
3.	Shipping of marble tiles to retailers	Number of shipments	2,300	$30 per shipment

2: Requirements

1.	Calculate Dutchman's operating income for 2016.
2.	For 2017, retailers are demanding a 6% discount off the 2016 price. Dutchman's suppliers are only willing to give a 4% discount. Dutchman expects to sell the same quantity of marble tiles in 2017 as in 2016.If all other costs and cost-driver information remain the same, calculateDutchman's operating income for 2017.
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 500 and the cost per order to $30 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 $38. Will Dutchman achieve its target operating income of $1.25 per tile in 2017? Show your calculations.