Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two dasses of distributors IT distributors and non-JIT distributors. The JT distributor places small, frequent orders, and the non-IT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. Stillater Designs provides the following information about customer related activities and costs for the most recent quarter Non-JIT Distributors Distributors Sales orders Sales calls Service calls 175 Average order size 350 750 $125 7.500 Manufacturing costunit $125 Customer costs: Processing sales orders $3,280,000 Seng 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 Sales (in units) Allocation 2. Conceptual connection Calculate the customer cost per distributor type ng activity-based cost assignments Round the interim calculations to the nearest com Ordering costs Previous Ne Check My Work eBook Calculator Sales (in unita) Allocation 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the interim calculations to the nearest dollar IT 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. S per unit 3. Assume that the IT distributors are simply imposing the frequent orders on Stillwater Designs. No formal discussion has taken place between IT customers and still water 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 Stilwater Designs management? It sounds like the IT buyers are switching their inventory carrying costs to Stillwater Designs without any significant benefit to Stillwater Designs. Still water Designs needs to increase prices to reflect the additional demands on customer support activities. Furthermore, additional price increases may be needed to reflect the increased number of setups, purchases, and so on, that are likely occurring inside the plant. Still water Designs should also immediately initiate discussions with its IT customers to begin negotiations for achieving some of the benefits that a JIT supplier should have such as long term contracts. The benefits of long-term contracting may offset most or all of the increased costs from the additional demands made on other activities 1. Determine sales in units) by multiplying average order size by sales orders, then multiply by selling price to determine sales Allocate customer costs based on sales. 2. Use the customer costs and customer related activities to calculate activity rates and assign costs based on activity for costs per distributor type. For the Non IT distributor price decrease Non IT distributors cost less to service than the IT distributors for the same number of sales and perhaps should be charged less. One way to find how much the price can be decreased is to divide the savings from the difference in methods by sales in its 3. Use you knowledge of activity based customer costing and the benefits of just in time manufacturing processes to select the correct answers in part 3. Previous Nos Check My Work . Email Instructor Submit Ansigment for All work saved. Save and tilt ERA