Figure 7-2. 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:
Refer to Figure 7-2.Calculate the total customer cost for the JIT distributor.
A)$487,500
B)$341,753
C)$600,000
D)$250,050
E)$448,791

Question

Figure 7-2. 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:
 Refer to Figure 7-2.Calculate the total customer cost for the JIT distributor.
A)$487,500 
B)$341,753 
C)$600,000 
D)$250,050 
E)$448,791

Quizplus · Accepted Answer

To calculate the total customer cost for JIT distributor, we need to add the costs of all activities:
Order Processing Cost = $200 per order x 500 orders = $100,000
Product Handling Cost = $45 per order x 500 orders = $22,500
Information Cost = $5 per order x 500 orders = $2,500
Total Customer Cost for JIT Distributor = $100,000 + $22,500 + $2,500 + $216,753 = $341,753. Therefore, the correct choice is B.