Suppose that Stillwater Designs has two classes of distributors: IT distributors and non-JIT distributors. The IT distributor places small, frequent orders, and the non-JIT distributor tends to place farger, 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-IT Distributors 1,000 100 70 70 350 175 Sales orders Sales calls Service calls Average order size Manufacturing cost/unit Customer costs: 750 7,500 $125 $125 Processing sales orders $3,330,000 1,120,000 Selling goods Servicing goods 1,050,000 Total $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 Sales (in units) 70 X 70 x 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) 70 X 70 x Sales 10,500X 10,500 X Allocation 56,250,000 X 56,250,000 X 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-IT Ordering costs 3,330,000 x 3,027.27 x Selling costs 560,000 560,000 Service costs 700,000 350,000 Total 287,272.73 X 2,727 X For non IT distributors by how much can the price be decreased without affecting customer profitability Round your answer to the nearest cent. 73.38 X 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 Stillwater Designs regarding the supply of goods on a JIT basis. The salts pattern has evolved over time. As an independent consultant, what would you suggest to Stillwater Designs' management? It sounds like the str buyers are switching their inventory carrying costs to Stillwater Designs without any significant benefit to Stillwater Designs, Stilwater Designs needs to increase S 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 contracts. The benefits of customers to begin negotiations for achieving some of the benefits that a JIT supplier should have such as long-term Previous Next Check My Work 1 more Check My Work uses remaining
