Activity-Based Customer-Driven Costs

Suppose that Stillwater Designs has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. Stillwater Designs provides the following information about customer-related activities and costs for the most recent quarter:

	JIT Distributors			Non-JIT Distributors
Sales orders	700			70
Sales calls	70			70
Service calls	350			175
Average order size	750			7,500
Manufacturing cost/unit	$125			$125
Customer costs:
Processing sales orders	$3,080,000
Selling goods	1,120,000
Servicing goods	1,050,000
Total	$5,250,000

Required:

1. Calculate the total revenues per distributor category, and assign the customer costs to each distributor type by using revenues as the allocation base. Selling price for one unit is $150.

	JIT		Non-JIT
Sales (in units)	fill in the blank 1		fill in the blank 2
Sales	$fill in the blank 3		$fill in the blank 4
Allocation	$fill in the blank 5		$fill in the blank 6

2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments.

	JIT		Non-JIT
Ordering costs	$fill in the blank 7		$fill in the blank 8
Selling costs	$fill in the blank 9		$fill in the blank 10
Service costs	$fill in the blank 11		$fill in the blank 12
Total	$fill in the blank 13		$fill in the blank 14

For non JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent.

what is the $ per unit