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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 Distributors 900 70 350 750 $125 $3,580,000 1,120,000 1,050,000 $5,750,000 Non-JIT Distributors 90 70 175 7,500 $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 Distributors 900 70 350 750 $125 $3,580,000 1,120,000 1,050,000 $5,750,000 Non-JIT Distributors 90 70 175 7,500 $125

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter11: Strategic Cost Management
Section: Chapter Questions
Problem 11E: Assign the customer-related activity costs to each customer type using activity rates. Now calculate...
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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 Ordering costs Selling costs Service costs 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 S Non-JIT Total 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
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 JIT Ordering costs Selling costs Service costs 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 S Non-JIT Total 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
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 Distributors 900 70 350 750 $125 $3,580,000 1,120,000 1,050,000 $5,750,000 Non-JIT Distributors 90 70 175 7,500 $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 Distributors 900 70 350 750 $125 $3,580,000 1,120,000 1,050,000 $5,750,000 Non-JIT Distributors 90 70 175 7,500 $125
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