Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Inspecting components (sampling only) Reworking products (due to failed component) Warranty work (due to failed component) II. Supplier Data Manzer Inc. Required: $89 Unit purchase price Units purchased Sampling hours* Rework hours Warranty hours * Sampling inspection for Manzer's product has been reduced because the reject rate is so low. 800,000 80 360 Activity Cost 800 $825,000 6,170,000 9,770,000 Buckner Company $86 3,200,000 3,920 5,640 15,200 1. Calculate the cost per component for each supplier, taking into consideration the costs of the supplier-related activities and using the current prices and sales volume. (Note: Round the intermediate calculations to the whole number for the following activity rates: "Reworking products" and "Warranty work". Round the unit cost to two decim places.)
Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Inspecting components (sampling only) Reworking products (due to failed component) Warranty work (due to failed component) II. Supplier Data Manzer Inc. Required: $89 Unit purchase price Units purchased Sampling hours* Rework hours Warranty hours * Sampling inspection for Manzer's product has been reduced because the reject rate is so low. 800,000 80 360 Activity Cost 800 $825,000 6,170,000 9,770,000 Buckner Company $86 3,200,000 3,920 5,640 15,200 1. Calculate the cost per component for each supplier, taking into consideration the costs of the supplier-related activities and using the current prices and sales volume. (Note: Round the intermediate calculations to the whole number for the following activity rates: "Reworking products" and "Warranty work". Round the unit cost to two decim places.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Required:
1. Calculate the cost per component for each supplier, taking into consideration the costs of the supplier-related activities and using the current prices and sales volume.
(Note: Round the intermediate calculations to the whole number for the following activity rates: "Reworking products" and "Warranty work". Round the unit cost to two decimal
places.)
Manzer Inc.
Buckner Company
2a. Suppose that Bowman loses $6,256,000 in sales per year because it develops a poor reputation due to defective units attributable to failed components. Using warranty
hours, assign the cost of lost sales to each supplier.
Manzer
Buckner
Manzer
per unit
2b. By how much would this change the cost of each supplier's component? Round your answers to the nearest cent.
unit cost increase
Buckner unit cost increase
per unit
$
$
Transcribed Image Text:Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two
local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner
sells the same component for $86. Bowman purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 components.
To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers:
I. Activity Data
Inspecting components (sampling only)
Reworking products (due to failed component)
Warranty work (due to failed component)
II. Supplier Data
Unit purchase price
Units purchased
Sampling hours*
Rework hours
Warranty hours
Manzer Inc.
Required:
$89
800,000
80
360
800
Activity Cost
$825,000
6,170,000
9,770,000
Buckner
Company
$86
3,200,000
3,920
5,640
15,200
* Sampling inspection for Manzer's product has been reduced because the reject rate is so low.
1. Calculate the cost per component for each supplier, taking into consideration the costs of the supplier-related activities and using the current prices and sales volume.
(Note: Round the intermediate calculations to the whole number for the following activity rates: "Reworking products" and "Warranty work". Round the unit cost to two decimal
places.)
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