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Grizzly Inc. is a small distributor of mechanical pencils. Grizzly identities its three major activities and cost pools as ordering, receiving and storage, and shipping,
Grizzly Inc. is a small distributor of mechanical pencils. Grizzly identities its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2016: 1(Click the icon to view the activity and cost pool details.) 2(Click the icon to view additional information.) Will Grizzly achieve its target operating income of $800,000 and its target operating income per unit of $3.20 per pencil pack in 2017? Show your calculations. First, determine the selling price to retailers in 2017. The selling price per pack to retailers in 2017 is l: . 1: Data Table Quantity of Cost per Unit of Activity Cost Driver Cost Driver Cost Driver 1. Placing and paying for orders of pencil packs Number of orders 900 $100 per order 2. Receiving and storage Loads moved 4,500 $60 per load 3. Shipping of pencil packs to retailers Number of shipments 1,500 $60 per shipment 2: More Info For 2016, Grizzly buys 250,000 pencil packs at an average cost of $5 per pack and sells them to retailers at an average price of $10 per pack. Assume Grizzly has no xed costs and no inventories. For 2017, retailers are demanding a 7% discount off the 2016 price. Grizzly's suppliers are only willing to give a 5% discount. Grizzly expects to sell the same quantity of pencil packs in 2017 as it did in 2016. Using value engineering, Grizzly decides to make changes in its ordering and receiving-andmstoring practices. By placing
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