Activity-Based Customer-Driven Costs Suppose that Stilwater Designs has two classes of distributors: OIT 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 700 70 Sales calls Service calls Average order size 3,500 70 70 350 175 850 Manufacturing cost/unit $125 $125 Customer costs: $3,280,000 Processing sales orders Selling goods Servicing goods 1,120,000 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 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 5 Sales (in units) 595,000 595,000 Sales 89,250,000 89,250,000 Allocation 5,450,000 5,450,000 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the Interim calculations to the nearest dollar OIT Non-IT Ordering costs Selling costs Service costs Total For non sit 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 JT distributors are simply imposing the frequent orders on Stllwater Designs. No formal discussion has taken place between IT customers and stilliwater Designs regarding the supply of goods on a JIT basis. The sales pattern has evolved over time. As 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the Interim calculations to the nearest dollar. Non-JIT Ordering costs JIT $ Selling costs $ Service costs Total For non DIT 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 IT distributors are simply Imposing the frequent orders on Stilwater Designs. No formal discussion has taken place between IT customers and Stilwater 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 art buyers are switching their inventory carrying costs to Stillwater Designs without any significant benefit to Stillwater Designs. Stilliwater 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 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 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