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 70 70
Service calls 350 175
Average order size 750 7,500
Manufacturing cost/unit $125 $125
Customer costs:
Processing sales orders $3,480,000
Selling goods 1,120,000
Servicing goods 1,050,000 5,650,000
Total 5,650,000
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
2. Conceptual Connection: Calculate the customer cost per distributor type using activity-based cost assignments.