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Caldwell Supply, a wholesaler, has determined that its operations have three primary activities: purchasing, warehousing, and distributing. The firm reports the following operating data for the year just completed:

$\backslash$table$[[$Activity$,$Cost Driver,$\backslash$table$[[$Quantity of Cost$],[$Driver$]],\backslash$table$[[$Cost per Unit of Cost$],[$Driver$]]],[$Purchasing$,$Number of purchase orders,$1,070,$$$157$ per order,,,$],[$Warehousing$,$Number of moves,$8,700,37$ per move,,,$],[$Distributing$,$Number of shipments,$570,87$ per shipment,,,$]]$

Caldwell buys $100,700$ units at an average unit cost of $$17$ and sells them at an average unit price of $$27.$ The firm also has fixed operating costs of $$250,700$ for the year.

Caldwell's customers are demanding a $17\%$ discount for the coming year. The company expects to sell the same amount if the demand for price reduction can be met. Caldwell's suppliers, however, are willing to give only a $11\%$ discount.

Required:

Caldwell has estimated that it can reduce the number of purchase orders to $750$ and can decrease the cost of each shipment by $$10$ with minor changes in its operations. Any further cost savings must come from reengineering the warehousing processes. What is the maximum cost $($i$.$e$.,$ target cost$)$ for warehousing if the firm desires to earn the same amount of profit next year?

Maximum cost

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