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Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT 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: Sales orders Sales calls Service calls Average order size Manufacturing cost/unit Customer costs: Processing sales orders Selling goods Servicing goods Total JIT Non-JIT Distributors Distributors 700 70 350 650 $125 $3,280,000 1,120,000 1,050,000 $5,450,000 70 70 175 6,500 $125

Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT 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: Sales orders Sales calls Service calls Average order size Manufacturing cost/unit Customer costs: Processing sales orders Selling goods Servicing goods Total JIT Non-JIT Distributors Distributors 700 70 350 650 $125 $3,280,000 1,120,000 1,050,000 $5,450,000 70 70 175 6,500 $125

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT 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: Sales orders Sales calls Service calls Average order size Manufacturing cost/unit Customer costs: Processing sales orders Selling goods Servicing goods Total JIT Non-JIT Distributors Distributors 700 70 350 650 $125 $3,280,000 1,120,000 1,050,000 $5,450,000 70 70 175 6,500 $125
Transcribed Image Text:Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT 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: Sales orders Sales calls Service calls Average order size Manufacturing cost/unit Customer costs: Processing sales orders Selling goods Servicing goods Total JIT Non-JIT Distributors Distributors 700 70 350 650 $125 $3,280,000 1,120,000 1,050,000 $5,450,000 70 70 175 6,500 $125
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) Sales Allocation Ordering costs Selling costs Service costs Total JIT 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the interim calculations to the nearest dollar. 5,450,000 X per unit $ JIT Non-JIT Non-JIT For non-JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent.
Transcribed Image Text: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) Sales Allocation Ordering costs Selling costs Service costs Total JIT 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the interim calculations to the nearest dollar. 5,450,000 X per unit $ JIT Non-JIT Non-JIT For non-JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent.
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