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Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: a distributors and non-IT distributors. The IT distributor places small, frequent orders, and

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Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: a distributors and non-IT distributors. The IT distributor places small, frequent orders, and the non-JIT distributor tends to place targer, less frequent orders. Both types of distributors are buying the same product. Stilliwater Designs provides the following information about customer related activities and costs for the most recent quarter: Non-JIT Distributors Distributors JIT Sales orders 1,000 100 Sales calls 70 70 Service calls 350 175 750 7.500 $125 $125 Average order size Manufacturing cost/unit Customer costs: Processing sales orders Selling goods Servicing goods Total $3,330,000 1,120,000 1,050,000 $5,500,000 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 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-IT 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 IT distributors by how much can the price be decreased without affecting customer profitability Round your answer to the nearest cent. per unit 3. Assume that the JIT distributors are simply imposing the frequent orders on Stilliwater Designs. No formal discussion has taken place between HT customers and Stillwater Designs regarding the supply of goods on a JIT basis. The sales pattern has evolved over time. As an independent consultant, what would you suggest to Stillwater Designs management? It sounds like the IT buyers are switching their inventory carrying costs to Stillwater Designs without any significant benefit to Stillwater Designs. Sollwater Designs needs to prices to reflect the additional demands on customer support activities. Furthermore, additional 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 achieving some of the benefits that a JIT supplier should have such as contracts. The benefits of Check My Work 5 mer Check My Winn

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