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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 1,000 100
Sales calls 70 70
Service calls 350 175
Average order size 850 8,500
Manufacturing cost/unit $125 $125
Customer costs:
Processing sales orders $3,230,000
Selling goods 1,120,000
Servicing goods 1,050,000
Total $5,400,000

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)
Sales $ $
Allocation $ $

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 $ $
Selling costs $ $
Service costs $ $
Total $ $

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

$ per unit

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