Question
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
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 | 1,100 | 110 | |
Sales calls | 70 | 70 | |
Service calls | 350 | 175 | |
Average order size | 650 | 6,500 | |
Manufacturing cost/unit | $125 | $125 | |
Customer costs: | |||
Processing sales orders | $3,280,000 | ||
Selling goods | 1,120,000 | ||
Servicing goods | 1,050,000 | ||
Total | $5,450,000 |
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. Round calculations to the nearest dollar.
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. Round the interim calculations to the nearest dollar.
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.
$fill in the blank 15 per unit
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