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: 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. 2. CONCEPTUAL CONNECTION Calculate the customer cost per distributor type using activity-based cost assignments. Discuss the merits of offering the non -JIT distributors a $2 price decrease (assume that they are agitating for a price concession). 3. CONCEPTUAL CONNECTION Assume that the JIT 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 of goods on a JIT basis. The sales pattern has evolved over time. As an independent consultant, what would you suggest to Stillwater Designs’ management?

BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter 5, Problem 42E
Textbook Problem

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:

Chapter 5, Problem 42E, Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of

Required:

  1. 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.
  2. 2. CONCEPTUAL CONNECTION Calculate the customer cost per distributor type using activity-based cost assignments. Discuss the merits of offering the non -JIT distributors a $2 price decrease (assume that they are agitating for a price concession).
  3. 3. CONCEPTUAL CONNECTION Assume that the JIT 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 of goods on a JIT basis. The sales pattern has evolved over time. As an independent consultant, what would you suggest to Stillwater Designs’ management?

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Chapter 5 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 5 - What is driver analysis? What role does it play in...Ch. 5 - What are value-added activities? Value-added...Ch. 5 - What are nonvalue-added activities? Nonvalue-added...Ch. 5 - Identify and define four different ways to manage...Ch. 5 - What is cycle time? Velocity?Ch. 5 - A batch-level driver is consumed by a product each...Ch. 5 - Which of the following is a nonunit-level driver?...Ch. 5 - Use the following information for Multiple-Choice...Ch. 5 - Use the following information for Multiple-Choice...Ch. 5 - The first stage of ABC entails the assignment of...Ch. 5 - The second stage of ABC entails the assignment of...Ch. 5 - Interview questions are asked to determine a. what...Ch. 5 - The receiving department employs one worker who...Ch. 5 - Assume that the moving activity has an expected...Ch. 5 - Which of the following is a true statement about...Ch. 5 - Which of the following is a true statement about...Ch. 5 - This year, Lambert Company will ship 1,500,000...Ch. 5 - Lambert Company has two suppliers: Deming and...Ch. 5 - A forklift and its driver used for moving...Ch. 5 - Which of the following are nonvalue-added...Ch. 5 - Suppose that a company is spending 60,000 per year...Ch. 5 - The cost of inspecting incoming parts is most...Ch. 5 - Thom Company produces 60 units in 10 hours. The...Ch. 5 - Thom Company produces 60 units in 10 hours. The...Ch. 5 - Striving to produce the same activity output with...Ch. 5 - Use the following information for Brief Exercises...Ch. 5 - Use the following information for Brief Exercises...Ch. 5 - Calculating ABC Unit Costs Perkins National Bank...Ch. 5 - Assigning Costs to Activities McCourt Company...Ch. 5 - Activity-Based Customer Costing Sleepeze Company...Ch. 5 - Activity-Based Supplier Costing Clearsound uses...Ch. 5 - Nonvalue-Added Costs Lemmons Inc. has the...Ch. 5 - Velocity and Cycle Time Kolby Company takes 36,000...Ch. 5 - Use the following information for Brief Exercises...Ch. 5 - Use the following information for Brief Exercises...Ch. 5 - Calculating ABC Unit Costs Community Credit Union...Ch. 5 - Assigning Costs to Activities Craig Company...Ch. 5 - Activity-Based Customer Costing Limpio Company...Ch. 5 - Activity-Based Supplier Costing Blackburn Inc....Ch. 5 - Nonvalue-Added Costs Evans Inc. has the following...Ch. 5 - Velocity and Cycle Time Tara Company takes 8,000...Ch. 5 - Consumption Ratios; Activity Rates Saludable...Ch. 5 - Activity Rates Patten Company uses activity-based...Ch. 5 - Comparing ABC and Plantwide Overhead Cost...Ch. 5 - Activity-Based Product Costing Suppose that a...Ch. 5 - Assigning Costs to Activities, Resource Drivers...Ch. 5 - Activity-Based Customer-Driven Costs Suppose that...Ch. 5 - Activity-Based Supplier Costing Bowman Company...Ch. 5 - Use the following information for Exercises 5-44...Ch. 5 - Use the following information for Exercises 5-44...Ch. 5 - Use the following information for Exercises 5-44...Ch. 5 - Cycle Time and Velocity In the first quarter of...Ch. 5 - Product-Costing Accuracy, Consumption Ratios Plata...Ch. 5 - Product-Costing Accuracy, Consumption Ratios,...Ch. 5 - Formation of an Activity Dictionary A hospital is...Ch. 5 - Activity Rates and Activity-Based Product Costing...Ch. 5 - Value- and Nonvalue-Added Costs Waterfun...Ch. 5 - Functional-Based versus Activity-Based Costing For...Ch. 5 - Plantwide versus Departmental Rates,...Ch. 5 - Production-Based Costing versus Activity-Based...Ch. 5 - Elmo Clinic has identified three activities for...Ch. 5 - Customers as a Cost Object Morrisom National Bank...Ch. 5 - Grundvig Manufacturing produces several types of...Ch. 5 - Activity-Based Supplier Costing Levy Inc....Ch. 5 - Danna Martin, president of Mays Electronics, was...Ch. 5 - John Thomas, vice president of Mallett Company (a...Ch. 5 - Cycle Time, Velocity, Product Costing Goldman...Ch. 5 - Sharp Paper Inc. has three paper mills, one of...Ch. 5 - Consider the following conversation between...

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