Clearsound uses Alpha Electronics and La Paz Company to buy two electronic compo
ID: 2343238 • Letter: C
Question
Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30Y. Consider two activities: testing components and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working properly. Reordering occurs because one or both of the components have failed the test and it is necessary to replenish component inventories. Activity cost information and other data needed for supplier costing are as follows:
I. Activity Costs Caused by Suppliers (testing failures and reordering as a result)
II. Supplier Data
Required:
Determine the cost of each supplier by using ABC. Round Test and Reorder rates to the nearest dollar, and final answers to the nearest cent.
Activity Costs Testing components $1,200,000 Reordering components 300,000Explanation / Answer
Activity : Activity rate Testing components 632 =1200000/(1100+780+10+10) Reordering components 3000 =300000/(60+40) 125X 30Y 125X 30Y Testing components 695200 492960 6320 6320 Reordering components 180000 120000 0 0 Total activity costs 875200 612960 6320 6320 Divided by Units purchased 120000 70300 15000 15000 Activity costs per unit 7.29 8.72 0.42 0.42 Add: Unit purchase price 10.00 26.00 12.00 28.00 Unit cost 17.29 34.72 12.42 28.42
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