BiskBiskTiles is a small distributor of marble tiles.BiskBiskidentifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for2019ActivityCost DriverQuantity of Cost DriverCost per Unit of Cost Driver1.Placing and paying for orders of marble tilesNumber of orders900$80 per order2.Receiving and storageLoads moved4,100$50 per load3.Shipping of marble tiles to retailersNumber of shipments2,500$40 per shipment For20192019,BiskBiskbuys230 comma 000230,000marble tiles at an average cost of$ 2$2per tile and sells them to retailers at an average price of$ 7$7per tile. AssumeBiskBiskhas no fixed costs and no inventories. 1.CalculateBiskBisk'soperating income for20192019.2.For20202020,retailers are demanding a55%discount off the20192019price.BiskBisk'ssuppliers are only willing to give a44%discount.BiskBiskexpects to sell the same quantity of marble tiles in20202020as in20192019.If all other costs and cost-driver information remain the same, calculateBiskBisk'soperating income for20202020.3.Suppose further thatBiskBiskdecides to make changes in its ordering and receiving-and-storing practices. By placing long-run orders with its key suppliers,BiskBiskexpects to reduce the number of orders to600600and the cost per order to$ 40$40per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved,BiskBiskexpects to reduce the number of loads moved to3 comma 2253,225and the cost per load moved to$ 48$48.WillBiskBiskachieve its target operating income of$ 3.33$3.33per tile in20202020?Show your calculations.

Solution:- Operating income is an accounting figure that measures the amount of profit…

Answered: BiskBisk Tiles is a small distributor…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

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BiskBisk

Tiles is a small distributor of marble tiles.

BiskBisk

identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for

2019

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	900	$80 per order
2.	Receiving and storage	Loads moved	4,100	$50 per load
3.	Shipping of marble tiles to retailers	Number of shipments	2,500	$40 per shipment

For

20192019,

BiskBisk

buys

230 comma 000230,000

marble tiles at an average cost of

$ 2$2

per tile and sells them to retailers at an average price of

$ 7$7

per tile. Assume

BiskBisk

has no fixed costs and no inventories.

1.	Calculate BiskBisk's operating income for 20192019.
2.	For 20202020, retailers are demanding a 55% discount off the 20192019 price. BiskBisk's suppliers are only willing to give a 44% discount. BiskBisk expects to sell the same quantity of marble tiles in 20202020 as in 20192019. If all other costs and cost-driver information remain the same, calculate BiskBisk's operating income for 20202020.
3.	Suppose further that BiskBisk decides to make changes in its ordering and receiving-and-storing practices. By placing long-run orders with its key suppliers, BiskBisk expects to reduce the number of orders to 600600 and the cost per order to $ 40$40 per order. By redesigning the layout of the warehouse and reconfiguring the crates in which the marble tiles are moved, BiskBisk expects to reduce the number of loads moved to 3 comma 2253,225 and the cost per load moved to $ 48$48. Will BiskBisk achieve its target operating income of $ 3.33$3.33 per tile in 20202020? Show your calculations.

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