Kim Distribution Services (KDS) distributes tood purchased in bulk to small reta
ID: 2544006 • Letter: K
Question
Kim Distribution Services (KDS) distributes tood purchased in bulk to small retailers. The firm is divided into two divisions: Purchasing and Distribution. Purchasing is responsible tor ordering goods from the manufacturer, receiving them, and then moving them to the appropriate location in the warehouse. Distribution is responsible for taking orders from retailers, picking the products from the warehouse for the orders, and packaging the orders for shipment. KDS has a policy of filling every order on the day of the order. If the firm is out of a particular item, it will ship a partial order and complete the order when the item is back in stock. Occasionally, an order will not have to be packaged if the retailer chooses to take delivery at the KDS loading dock Distribution has 16 employees who are responsible for the activities, and all 16 are trained to handle any of the three tasks. Each of these employees works 40 hours per week for 50 weeks. There is an allowance of 20 percent of the employees' time for training and other administrative tasks. The total costs of distribution for the coming year are estimated to be $810,000. When asked, the manager of Distribution estimated the following times for each of the three activities: Taking orders: 11 minutes. Picking orders: 15 minutes. Packaging orders: 22 minutes. During the year, the Distribution received 25,500 orders. Because of out-of-stock events, pickers had to pick 30,500 orders. 27,900 orders were packaged Required: a. What is the cost per minute for activities in Distribution(Round your answer to 2 decimal places.) Cost per minute b. What is the cost of an order that requires all three activities? (Round your intermediate calculations and final answers to 2 decimal places.) Total costsExplanation / Answer
Answer
a. The cost per minute for activities in Distribution= total distribution costs / Total working minutes available
= $810000 / 1536000
= $0.53 per available minute
b. The cost of an order that requires all three activities
= (11+15+22) * 0.53
= $26.44
c. Total minutes of unused capacity the Distribution have for the year = Available minutes - Used minutes
= 1536000 - 1351800
= 184200 minutes
d. The cost of the unused capacity in Distribution
= 184200 * 0.53
= $97626
Working:
1.
Total working minutes available = 16 employees*40 hours*50 weeks*(1-0.20)*60 minutes
= 1536000 minutes
2.
Total actual working minutes used during the year = Taking orders + Picking orders + Packaging order
=11m*25500 + 15m*30500 + 22m*27900
=280500+457500+613800
= 1351800 minutes
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