Superior Electronics produces wireless earbuds. The charging cases used to produce the earbuds are purchased from an external supplier. Each year, 36,000 cases are used at a rate of 120 cases per day. Some days as many as 160 cases are used. On average it takes 5 days after an order is placed for the inventory to arrive at Superior Electronics.

Superior Electronics produces wireless earbuds. The charging cases used to produce the earbuds are purchased from an external supplier. Each year, 36,000 cases are used at a rate of 120 cases per day. Some days as many as 160 cases are used. On average it takes 5 days after an order is placed for the inventory to arrive at Superior Electronics.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 6E: Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of...

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Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of$25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk usesa PC and laser printer in processing orders. Time available on each PC system is sufficient toprocess 6,500 orders per year. The cost of each PC system is $1,100 per year. In addition to thesalaries, Elliott spends $27,560 for forms, postage, and other supplies (assuming 26,000 purchaseorders are processed). During the year, 25,350 orders were processed.Required:1. Classify the resources associated with purchasing as (1) flexible or (2) committed.2. Compute the total activity availability, and break this into activity usage and unused activity.3. Calculate the total cost of resources supplied (activity cost), and break this into the cost ofactivity used and the cost of unused activity.4. (a) Suppose that a large special order will cause an additional 500 purchase orders. Whatpurchasing costs are…
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