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11. Nerrod Company sells its products at $780 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has estimated the

11. Nerrod Company sells its products at $780 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has estimated the following operating costs:

Activity Cost Driver and Rate
Sales calls $ 540 per visit
Order processing $ 170 per order
Deliveries $ 65 per order + $0.50 per mile
Sales returns $ 80 per return and $3.0 restocking per unit returned

Nerrod Company has gathered the following data pertaining to activities it performed for two of its customers:

XBT NINTO
Number of orders 24 2
Number of parts per order 640 2,140
Sales returns:
Number of returns 4 10
Number of units returned 40 50
Number of sales calls 11 7
Miles per delivery 10 20
Shipping terms FOB, Factory FOB, Destination

What is Nerrod's total sales-sustaining cost applicable to XBT as a customer?

  • $0.

  • $990.

  • $4,190.

  • $6,370.

  • $6,490.

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