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 850 8,500
Manufacturing cost/unit $125 $125
Customer costs:
Processing sales orders $3,430,000
Selling goods 1,120,000
Servicing goods 1,050,000
Total $5,600,000
