Steller Manufacturing has two classes of distributors: JIT distributors and non-

Question

Steller Manufacturing 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 purchase the same product. The customer activities and costs for the previous quarter are found below:

Activity

JIT

Non-JIT

Sales Orders

400

25

425

Sales Calls

20

20

40

Service Calls

180

80

160

Average order size

75

1200

Manufacturing cost/unit

$40

$40

Customer Costs

Processing sales orders

$150,000

Selling Goods

$145,000

Servicing goods

$185,000

Total

$485,000

1) Calculate the activity rate for processing sales orders

a. $330.09 per order

b. $525 per order

c. $275.76 per order

d. $352.94 per order

e. $342.43 per order

2) Calculate the activity rate for selling goods

a. $3625 per sales call

b. $3550 per sales call

c. $2200 per sales call

d. $4800 per sales call

e. $9400 per sales call

3) Calculate the activity rate for servicing goods

a. $1089.00 per service call

b. $750.10 per service call

c. $675.50 per service call

d. $1,000.00 per service call

e. $711.54 per service call

4) Calculate the total customer cost for the JIT distributor

a. $487500

b. $341753

c. $600000

d. $250050

e. $448791

5) Calculate the total customer cost for the non-JT distributor

a. $150025

b. $122500

c. $175200

d. $138247

e. $178791

Activity

JIT

Non-JIT

Sales Orders

400

25

425

Sales Calls

20

20

40

Service Calls

180

80

160

Average order size

75

1200

Manufacturing cost/unit

$40

$40

Customer Costs

Processing sales orders

$150,000

Selling Goods

$145,000

Servicing goods

$185,000

Total

$485,000

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Activity rate for processing sales orders = 150000/425 = 352.94

Part 2:

Activity rate for selling goods = 145000/40 = 3625

Part 3:

Activity rate for servicing goods = 185000/260 = 711.54

Part 4:

Total Customer Cost = 400*352.94 + 20*3625 + 180*711.54 = 341753

Part 5:

Total Customer Cost = 25*352.94 + 20*3625 + 80*711.54 = 138247

Thanks.

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