Why do transport costs initially decrease as the number of warehouses in a system increases? Why do transportation costs eventually increase as the number of warehouses increase? Why do inventory costs increase as the number of warehouses in a system increases?© BrainMass Inc. brainmass.com October 16, 2018, 10:11 pm ad1c9bdddf
Why do transport costs initially decrease as the number of warehouses in a system increases? Why do transportation costs eventually increase as the number of warehouses increase? Why do inventory costs increase as the number of warehouses in a system increases?
As the number of warehouses in a system increase, there is a decrease in the cost of transport. The general reason is that there are economies of scale. In particular, when an order is to be executed and we assume that the product is available at each location, the order is shipped from the warehouse closest to the customer. This reduces transportation costs. Moreover, when goods are shipped to the warehouses, one truckload can service more than one warehouse reducing transportation costs. Finally, when a product is manufactured a part of the production is shipped directly to the warehouse closest to the plant; another part of the production is shipped to the warehouse second closest to the plant ...
This answer provides you an excellent discussion on Transportation costs
Items 8-A1, 8-A3, and 8-26 (circled). Please show all work/calculations. Any questions you may have will get quick responses. thanks!
8-A1 Flexible and Static Budgets
Burton Transportation Company's general manager reports quarterly to the company president on the firm's operating performance. The company uses a budget based on detailed expectations for the forthcoming quarter. The general manager has just received the condensed quarterly performance report shown in Exhibit 8-10.
Although the general manager was upset about not obtaining enough revenue, she was happy that her cost performance was favorable; otherwise, her net operating income would be even worse.
The president was totally unhappy and remarked, "I can see some merit in comparing actual performance with budgeted performance because we can see whether actual revenue coincided with our best guess for budget purposes. But I can't see how this performance report helps me evaluate cost-control performance."
1. Prepare a columnar flexible budget for Burton Transportation at revenue levels of $7,600,000, $8,000,000, and $8,400,000. Use the format of the last three columns of Exhibit 8-2, page 345. Assume that the prices and mix of products sold are equal to the budgeted prices and mix.
2. Write out the flexible budget formula for costs as a function of revenue.
3. Prepare a condensed table showing the static budget variance, the sales-activity variance, and the flexible-budget variance. Use the format of Exhibit 8-5, page 347.
8-A3 Direct-Material and Direct-Labor Variances
Skold Instruments manufactures trumpets, trombones, tubas, and other brass instruments. The following standards were developed for a line of trumpets.
Standard Inputs Expected
For Each Unit of Output Standard Price per
Achieved Unit of Input
Direct materials 5 pounds $10 per pound
Direct labor 10 hours $25 per hour
During April, Skold scheduled 550 trumpets for production. However, the company produced only 525.
Skold purchased and used 2,700 pounds of direct materials at a unit price of $8.50 per pound. It used 5,700 hours of direct labor at an actual rate of $26.00 per hour.
1. Compute the standard cost per trumpet for direct materials and direct labor.
2. Compute the price variances and quantity variances for direct materials and direct labor.
3. Based on there sketchy data, what clues for investigation are provided by the variances?
8-26 Flexible Budget
Scottish Designs has a department that makes high-quality leather cases for iPods. Consider the following data for a recent month.
Fill in the unknowns.