Midwest

Submitted By nsuresh77
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“I pledge my honor that I have not violated the Honor Code for this assignment.”

Suresh Nistala

Midwest Office Products
Friday, July 8th, 2016

Managerial Accounting and Analysis

Question 1
Based on the interviews and data in the case, estimate: a) The cost of processing cartons through the facility
Total number of cartons that can be processed by Midwest in a year are 80,000.
75,000 cartons processed through freight and the rest 5,000 by desktop delivery option.
Personnel expenses incurred by Midwest in a year was \$ 2,570,000 which included warehouse and truck drivers’ costs. Truck driver expenses per year was \$ 250,000. Therefore, the warehouse personnel costs were \$ 2,320,000 (2,570,000 – 250,000). The warehouse expenses were \$ 2 MM.
Warehouse personnel costs/carton = 2,320,000 / 80,000 = 29
Warehouse costs/carton = 2,000,000 / 80,000 = 25.
The total costs for processing cartons through the facility was therefore, \$54 per carton.

b) The cost of entering electronic and manual customer orders
The total cost for order entry at Midwest was \$ 840,000 which included salaries, fringe benefits, supervision, occupancy and equipment costs to the operators. There were 16 order entry operators. Each operator had a 1750 hours per year of working time and 1500 hours per year of productive work time. Therefore, the total work time was 28,000 hours (1750*16) and a productive time of 24,000 hours (1500*16).
For manual entry, the operators needed 0.15 hours to enter basic information and an additional 0.075 hours for each line items. On an average, the operators needed 0.1 hours to verify information electronic order.
Cost per productive hour = 840,000 / 24,000 = \$35
Cost per work hour = 840,000 / 28,000 = \$30
Cost for entering electronic orders = 35 * 0.1 = \$3.5
Cost of manual entry order = 35 * (0.15 + 0.075) = \$7.875

c) The...

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