Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

need help on the last part of problem #2. $____per unit Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT distributors

image text in transcribedimage text in transcribedneed help on the last part of problem #2. $____per unit

Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT distributors and non-JIT distributors. The IT 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 900 90 Sales calls 70 70 Service calls 350 175 850 8,500 Average order size 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 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) 765,000 765,000 Sales S 114,750,000 114,750,000 Allocation $57,375,000 $57,375,000 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 2,981,817 298,183 560,000 Selling costs Service costs 560,000 350,000 350,000 Total 3,891,817 1,208,183 For non JIT 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 Stillwater Designs. No formal discussion has taken place between JIT customers and Stillwater Designs regarding the supply goods on a IT basis. The sales pattern has evolved over time. As an independent consultant, what would you suggest to Stillwater Designs' management? 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, 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions