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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.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: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 $ $
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.)
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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