Mustaine 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: jit non-jit sales orders 300 20 sales calls 25 25 service calls 150 75 average order size 100 1,000 manufacturing cost/unit $50 $50 customer costs: processing sales orders $200,000 selling goods $120,000 servicing goods $150,000 total $470,000. calculate the activity rate for processing sales orders.
(a) $625 per order
(b) $889 per order
(c) $182 per order
(d) $667 per order
(e) $1.47 per order

(A) $625 per order

Explanation:

Processing a sales order shall be based on the number of orders processed.

As the total orders processed are:

JIT = 300

Non JIT = 20

Therefore, total orders = 320

Total cost to be allocated = $200,000 that is the order processing cost of previous quarter.

Cost per order shall be

= $625 per order.

Note: The order size do not matter.

Therefore, correct option is:

(A) $625 per order

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