Suppose that Stillwater Designs has two classes of distributors: JIT distributors and non-JIT distributors. The JIT...
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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 JIT Non-JIT Distributors Distributors 800 80 70 70 350 175 850 8,500 $125 $125 Customer costs: Processing sales orders $3,330,000 Selling goods Servicing goods 1,120,000 1,050,000 Total $5,500,000 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 Sales (in units) 680,000 Sales 102,000,000 2,750,000 Non-JIT 680,000 102,000,000 Allocation 2,750,000 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the interim calculations to the nearest dollar. JIT Ordering costs Selling costs 3,208,800 x x Service costs x Total x Non-JIT x x For non-JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent. X per unit 3. Assume that the JIT distributors are simply imposing 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? It sounds like the JIT buyers are switching their inventory carrying costs to Stillwater Designs without any significant benefit to Stillwater Designs. Stillwater Designs needs to increase prices to reflect the additional demands on customer support activities. Furthermore, additional price increases the increased number of setups, purchases, and so on, that are likely occurring inside the plant. Stillwater Designs should also immediately initiate discussions with its JIT customers to begin negotiations for achieving some of the benefits that a JIT supplier should have, such as long-term long-term contracting may offset most or all of the increased costs from the additional demands made on other activities. may be needed to reflect contracts. The benefits of 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 JIT Non-JIT Distributors Distributors 800 80 70 70 350 175 850 8,500 $125 $125 Customer costs: Processing sales orders $3,330,000 Selling goods Servicing goods 1,120,000 1,050,000 Total $5,500,000 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 Sales (in units) 680,000 Sales 102,000,000 2,750,000 Non-JIT 680,000 102,000,000 Allocation 2,750,000 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. Round the interim calculations to the nearest dollar. JIT Ordering costs Selling costs 3,208,800 x x Service costs x Total x Non-JIT x x For non-JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent. X per unit 3. Assume that the JIT distributors are simply imposing 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? It sounds like the JIT buyers are switching their inventory carrying costs to Stillwater Designs without any significant benefit to Stillwater Designs. Stillwater Designs needs to increase prices to reflect the additional demands on customer support activities. Furthermore, additional price increases the increased number of setups, purchases, and so on, that are likely occurring inside the plant. Stillwater Designs should also immediately initiate discussions with its JIT customers to begin negotiations for achieving some of the benefits that a JIT supplier should have, such as long-term long-term contracting may offset most or all of the increased costs from the additional demands made on other activities. may be needed to reflect contracts. The benefits of
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Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
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