Suppose that Stillwater Designs has two classes of distributors: IT 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 JIT Distributors Non-JIT Distributors 1,000 100 70 70 350 175 650 $125 6,500 $125 Manufacturing cost/unit Customer costs: Processing sales orders $3,180,000 Selling goods 1,120,000 1,050,000 $5,350,000 Servicing goods Total 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 JIT 650,000 97,500,000 2,675,000 Non-JIT 650,000 97,500,000 2,675,000 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the interim calculations to the nearest dollar. Ordering costs Selling costs Service costs Total JIT Non-JIT 2,890,909 289,091 560,000 560,000 700,000 4,150,909 350,000 1,199,091 For non JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent. 9.23 per unit
Suppose that Stillwater Designs has two classes of distributors: IT 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 JIT Distributors Non-JIT Distributors 1,000 100 70 70 350 175 650 $125 6,500 $125 Manufacturing cost/unit Customer costs: Processing sales orders $3,180,000 Selling goods 1,120,000 1,050,000 $5,350,000 Servicing goods Total 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 JIT 650,000 97,500,000 2,675,000 Non-JIT 650,000 97,500,000 2,675,000 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the interim calculations to the nearest dollar. Ordering costs Selling costs Service costs Total JIT Non-JIT 2,890,909 289,091 560,000 560,000 700,000 4,150,909 350,000 1,199,091 For non JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent. 9.23 per unit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
Sales (in units)
Sales
Allocation
Ordering costs
Selling costs
Service costs
Total
JIT
2.23
per unit
650,000
1,120,000
1,050,000
$5,350,000
Total
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.
97,500,000
2,675,000
JIT
Distributors
JIT
1,000
2,890,909
70
650,000
97,500,000
2,675,000
2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the interim calculations to the nearest dollar.
350
650
$125
$3,180,000
Non-JIT
Distributors
Non-JIT
100
Non-JIT
70
289,091
560,000
350,000
560,000
700,000
4,150,909
1,190,091
For non JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent.
175
6,500
$125
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