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 Costs     Testing parts $4,500,000 Reordering parts 1,125,000 II.   Supplier Data   Otavalo Manufacturing   Piura Company                       Part #625 Part #827   Part #625 Part #827                 Unit purchase price $30 $78   $36 $84                 Units purchased 450,000 225,000   56,250 56,250                 Failed tests 4,500 2,925   39 36                 Number of reorders 225 150   0 0                                                                                                     Required: Determine the cost of each supplier by using ABC. Round unit costs to two decimal places.   Otavalo Manufacturing Piura Company Part #625 $ $ Part #827 $ $

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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 Costs    
Testing parts $4,500,000
Reordering parts 1,125,000

II.   Supplier Data

  Otavalo Manufacturing   Piura Company                    
  Part #625 Part #827   Part #625 Part #827                
Unit purchase price $30 $78   $36 $84                
Units purchased 450,000 225,000   56,250 56,250                
Failed tests 4,500 2,925   39 36                
Number of reorders 225 150   0 0                
                           
                           
                           

Required:

Determine the cost of each supplier by using ABC. Round unit costs to two decimal places.

  Otavalo Manufacturing Piura Company
Part #625 $ $
Part #827 $ $
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