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 | 900 | 90 | |
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) | ||||
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 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started