Activity-Based Supplier Costing 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 Required: Manzer Inc. Manzer Inc. Buckner Company $89 800,000 104.83 X per unit 92.36 ✔ per unit 80 360 Activity Cost $785,000 8,020,000 12,670,000 800 Buckner Company Warranty hours * Sampling inspection for Manzer's product has been reduced because the reject rate is so low. $86 3,200,000 3,920 5,640 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.) 15,200
Activity-Based Supplier Costing 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 Required: Manzer Inc. Manzer Inc. Buckner Company $89 800,000 104.83 X per unit 92.36 ✔ per unit 80 360 Activity Cost $785,000 8,020,000 12,670,000 800 Buckner Company Warranty hours * Sampling inspection for Manzer's product has been reduced because the reject rate is so low. $86 3,200,000 3,920 5,640 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.) 15,200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Activity-Based Supplier Costing
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.
Manzer Inc.
Buckner Company
$89
800,000
104.83 X per unit
92.36✔ per unit
80
360
800
Activity Cost
$785,000
8,020,000
12,670,000
Buckner
Company
$86
* Sampling inspection for Manzer's product has been reduced because the reject rate is so low.
3,200,000
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.)
3,920
5,640
15,200
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