Workshape 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 as follows:
- Calculate the total customer cost for the JIT distributors.(Note: Round the activity rates and activity costs to the nearest dollar.)

A) $487,560
B) $362,890
C) $612,370
D) $250,020
E) $448,730

Question

Workshape 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 as follows:
- Calculate the total customer cost for the JIT distributors.(Note: Round the activity rates and activity costs to the nearest dollar.)
 
A) $487,560 
B) $362,890 
C) $612,370 
D) $250,020 
E) $448,730

Quizplus · Accepted Answer

Activity rate for processing sales orders = Cost of processing sales orders / Total number of sales orders = $160,000 / 530 sales orders = $302 per sales order
Activity rate for selling goods = Cost of selling goods / Total number of sales calls = $155,000 / 60 sales calls = $2,583 per sales call
Activity rate for servicing goods = Cost of servicing goods / Total number of service calls = $195,000 / 290 service calls = $672 per service call
Total customer cost for the JIT distributors:
Cost of ordering = Activity rate for processing sales orders × Number of sales orders =
$302 × 500 sales orders = $151,000
Cost of selling = Activity rate for selling goods × Number of sales calls = $2,583 × 30 sales calls = $77,490
Cost of servicing = Activity rate for servicing goods × Number of service calls = $672 × 200 service calls = $134,400
Total customer cost for the JIT distributors = Cost of ordering + Cost of selling + Cost of servicing = ($151,000 + $77,490 + $134,400) = $362,890

Workshape Manufacturing Has Two Classes of Distributors: JIT Distributors and Non-JIT