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 Non-JIT Distributors Distributors Sales orders Sales calls Service calls 700 70 70 70 350 175 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 Required: $5,250,000 FREE DEF 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 Sales (in units) 525,000 Sales $ 78,750,000 Allocation $ 2,625,000 Non-JIT 525,000 78,750,000 S 2,625,000 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. JIT Non-JIT < Ordering costs S 2,800,000 S 280,000 Selling costs S 560,000 S 560,000 Service costs S 700,000 9 350,000 Total $ 4,060,000 S 1,190,000 For non JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent. 3.26 per unit 3. Assume that the JIT distributors are simply imposing the frequent orders on Stillwater Designs. No formal discussion has taken place RFERM 1,190,000 For non JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent. 3.26 per unit 3. Assume that the JIT distributors are simply imposing the frequent orders on Stillwater Designs. No formal discussion has taken place between JIT customers and Stillwater Designs regarding the supply of goods on a JIT basis. The sales pattem has evolved over time. As an independent consultant, what would you suggest to Stillwater Designs management? additional price increases It sounds like the JIT buyers are switching their inventory carrying costs to Stillwater Designs without any significant benefit to Stillwater Designs. Stillwater Designs needs to increase prices to reflect the additional demands on customer support activities. Furthermore, may be needed to reflect the increased number of setups, purchases, and so on, that are likely occurring inside the plant. Stillwater Designs should also immediately initiate discussions with its JIT customers to begin negotiations for contracts. The benefits of long-term achieving some of the benefits that a JIT supplier should have, such as long-term contracting may offset most or all of the increased costs from the additional demands made on other activities