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: JIT Distributors Non-JIT Distributors Sales orders 700 70 Sales calls Service calls >Average order size 70 70 350 175 750 7,500 Manufacturing cost/unit $125 $125 Customer costs: Processing sales orders $3,080,000 Selling goods 1,120,000 Servicing goods 1,050,000 Total $5,250,000 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. 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. JIT Non-JIT Sales (in units) 660000 X 660,000 X Sales 99,000,000 2,725,000 X 99,000,000 X 2,725,000 X Allocation 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. JIT Non-JIT Ordering costs $ 2,981,818 X 298,182 X Selling costs $ 560,000 560,000 Service costs 700,000 350,000 Total 4,241,818 X 1,208,182 X For non JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent. 4.13 X per unit 3. 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? 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 may be needed to reflect the increased customer support activities. Furthermore, additional price increases number of setups, purchases, and so on, that are likely occurring inside the plant. Stillwater Designs should also 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. JIT Non-JIT Sales (in units) 660000 X 660,000 X Sales 99,000,000 2,725,000 X 99,000,000 X 2,725,000 X Allocation 2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments. JIT Non-JIT Ordering costs $ 2,981,818 X 298,182 X Selling costs $ 560,000 560,000 Service costs 700,000 350,000 Total 4,241,818 X 1,208,182 X For non JIT distributors by how much can the price be decreased without affecting customer profitability? Round your answer to the nearest cent. 4.13 X per unit 3. 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? 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 may be needed to reflect the increased customer support activities. Furthermore, additional price increases number of setups, purchases, and so on, that are likely occurring inside the plant. Stillwater Designs should also