Question

warehouse costing question

Put together a warehouse budget, based on the info below calculate the estimated annual warehouse cost, warehouse cost per case and warehouse cost as a percentage of sales. (You can assume any information not mentioned below if needed)

--The warehouse is 120K ft2 and leased at an annual rate of $3.80/ft2 net of taxes maintenance and insurance.

--Additional monthly facility costs for taxes, maintenance, and insurance, are $0.20/ft2. In addition, you have uncovered 3 months of typical utility bills that total $12,000.

--The warehouse has 40 direct employees, all making $12/hrplus benefits. Also, the operation has 5 clerical staff, someone credible tells you they get paid $2.00 more per hour than the direct associates.

--The facility was 3 managers, making an average salary of $60K/year, plus a bonus that is 10% of salary.

--All associated receive a health care insurance the average premium last year paid by the company was $10K per employee and expected to go up by 5% this year. All other benefits (payroll taxes) are about 10% of wages.

--The company is financing the purchase of 10 forklifts at $35K each over 7 years at 3% interest

--Racking was installed 2 years ago, 8K pallet positions were purchased at $60/each and are currently being financed over 10 years at 4% interest

--A warehouse management system that was purchased for $240K is being financed over 3 years at 4% interest. Additional annual system maintenance costs are estimated at 25% of the original system cost

--The operation pays a temporary labor provider $15/hr(no benefits) for additional help, you uncover that 15% of the total direct hours are supplied by this temporary labor provider

--No data can be gathered, however, all other costs are estimated to be around 20% of the total annual operation budget

--Annual sales were $129 million last year; a case sells for $10.75.

1. What is the estimated annual warehouse cost?

2. What is the warehouse cost per case?

3. What is the warehouse cost as a percentage of sales?

Answer 1

1. Annual warehouse cost

Rent (120,000* 3.8) = 456,000

Taxes and insurance ( 120,000*0.2) = 24,000

direct employees wages (2920 * 12 * 40) = 1401600

clerical staff cost ( 2920*14*5) = 204400

utility bills cost = 12000

manager's salary including 10% bonus (66000* 3) = 198000

health insurance (10000*105% * 48) = 504000

payroll taxes ( 105 of wages ) = (10401600+204400+180000) 10% = 178600

interest on forklift ( 3/100 * 35000*10 ) =10500

interest on racking (8000*60*4%) =19200

interest on warehouse management system (240,000*4%) = 9600

Additional annual system maintenance cost = (25% of 240,000) = 60000

Temporary labour ( 15% of 2920 * 15) = 6570

all other costs ( 15% of annual costs ) = 544318

Total cost = costs up till other costs divided by (100-15) = 3084470*100/85 = 3628788  

Annual warehouse cost = $3,628,788

2) Cost per case

No of cases sold = total sales/ selling price of 1 case

=$129mn/10.75

= 12mn cases

warehouse cost per case = 3628788/12000000 = $0.302399

3) warehouse cost as a percentage of sales

=3628788/129mn* 100 = 2.813%

Assumptions

1) Total direct hours assumed are = 365 days * 8 hrs a day that is equal to 2920 hrs

2) Annual warehouse cost has been rounded of to the nearest $