Tulsa Company is a car brake repair and replacement company operating in the after-sales market. Tulsa's purchasing manager uses two suppliers (Stirdulo and Fallimento) for the source of its passenger car brakes. Data relating to brake discs (Discs) and brake pads (Pads) are given below. I. Activity costs Activity Adverse buying* $800,000 Supplier returns* 100,000 II. Supplier Data Stridulo Brakes Fallimento Brakes Discs Pads Discs Pads Unit purchase price $53.75 $148.75 $46.50 $146.50 Units purchased 10,000 10,000 15,000 15,000 Insufficient units 2,000 2,000 6,000 6,000 Returned units 500 500 1,500 1,500 Required: 1. Calculate the activity rates for assigning costs to suppliers. 2. Calculate the total unit purchasing cost for each component for each supplier.
Tulsa Company is a car brake repair and replacement company operating in the after-sales market. Tulsa's purchasing manager uses two suppliers (Stirdulo and Fallimento) for the source of its passenger car brakes. Data relating to brake discs (Discs) and brake pads (Pads) are given below.
I. Activity costs
| Activity | |
| Adverse buying* | $800,000 |
| Supplier returns* | 100,000 |
II. Supplier Data
| Stridulo Brakes | Fallimento Brakes | ||||||||||||
| Discs | Pads | Discs | Pads | ||||||||||
| Unit purchase price | $53.75 | $148.75 | $46.50 | $146.50 | |||||||||
| Units purchased | 10,000 | 10,000 | 15,000 | 15,000 | |||||||||
| Insufficient units | 2,000 | 2,000 | 6,000 | 6,000 | |||||||||
| Returned units | 500 | 500 | 1,500 | 1,500 |
Required:
1. Calculate the activity rates for assigning costs to suppliers.
2. Calculate the total unit purchasing cost for each component for each supplier.
3. What if the quantity of brake pads that can be purchased is limited to 20,000 units from Stridulo and 25,000 units from Fallimento? There is no limit from either source for brake discs. Based on cost, what purchasing mix should be chosen? What problem does this create? What else might you suggest if you were the manager of Tulsa?
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