Fame Company manufactures engines. Fame produces all the parts necessary for its engines, except for one electronic component, which is purchased from two local suppliers: Hydra International and Parable Company. Both suppliers are reliable and rarely deliver late. Hydra sells the component for $12.00 per unit, while Parable sells the same component for $10.00. Fame purchases 80% of its components from Parable because of the lower price it offers. The total annual demand is 95,000 units.   I. Activity Data ​ ​ Activity Cost Inspecting components (sampling only) $ 210,000 Reworking products (due to failed component) $2,454,000 Warranty work (due to failed component) $1,923,000 ​ II. Supplier Data ​ ​ ​ Hydra Parable ​ International Company Unit purchase price $12.00 $10.00 Units purchased 19,000 76,000 Sampling hours 60 2,600 Rework hours 150 3,800 Warranty hours 550 7,000 ​ Calculate the total cost per component associated with using Parable Company as the supplier. (Note: Round the activity rates to the nearest dollar and the cost per component to two decimal places.)   a. $67.24   b. $15.74   c. $78.92   d. $12.45   e. $86.28

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Fame Company manufactures engines. Fame produces all the parts necessary for its engines, except for one electronic component, which is purchased from two local suppliers: Hydra International and Parable Company. Both suppliers are reliable and rarely deliver late. Hydra sells the component for $12.00 per unit, while Parable sells the same component for $10.00. Fame purchases 80% of its components from Parable because of the lower price it offers. The total annual demand is 95,000 units.

 

I. Activity Data

Activity Cost

Inspecting components (sampling only)

$ 210,000

Reworking products (due to failed component)

$2,454,000

Warranty work (due to failed component)

$1,923,000

II. Supplier Data

Hydra

Parable

International

Company

Unit purchase price

$12.00

$10.00

Units purchased

19,000

76,000

Sampling hours

60

2,600

Rework hours

150

3,800

Warranty hours

550

7,000

Calculate the total cost per component associated with using Parable Company as the supplier. (Note: Round the activity rates to the nearest dollar and the cost per component to two decimal places.)

  a.
$67.24
  b.
$15.74
  c.
$78.92
  d.
$12.45
  e.
$86.28
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