Activity-Based Supplier Costing Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in the manufacture of its permanent-magnet motors: Part # 625 and Part # 827. Consider two activities: testing parts and reordering parts. After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part 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) Activity Testing parts Reordering parts II. Supplier Data Otavalo Manufacturing Part #625 Part # 625 Part # 827 $30 450,000 4,500 225 $4,500,000 1,125,000 Otavalo Manufacturing Part # 827 Unit purchase price Units purchased Failed tests Number of reorders Required: Determine the cost of each supplier by using ABC. Round unit costs to two decimal places. Otavalo Manufacturing Piura Company $78 Costs 225,000 2,925 150 Piura Company Part # 625 $36 56,250 39 Piura Company Part # 827 $84 56,250 0 36 0

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