Question

Activity-Based Supplier Costing Ventana Company is a car window repair and replacement company operating in the after-sales market. Ventana's purchasing manager uses two suppliers (Jones Glass and Claro Glass) for the source of its passenger car windows. Data relating to side windows (Side) and windshields (WS) are given below. I. Activity costs Activity Adverse buying* Supplier returns** 744,000 74,100 * Extra cost of purchasing from local car dealer because of insufficient delivery of supplier. ** Windows returned because they were not ordered or because they were defective. II. Supplier Data Unit purchase price Units purchased Insufficient units Jones Glass SidewS $70 $145 15,000 15,000 750 750 425 425 Claro Glass Sidews $67 $142 30,000 30,000 3,900 3,900 1,000 1,000 Returned units Required: 1. Calculate the activity rates for assigning costs to suppliers. Adverse buying rate Supplier return rate $ $ 80 26 per adverse purchase per return

Answer 1

	Total unit cost
	Jones Glass	Claro Glass
Side	$74.74	$78.27
WS	$149.74	$153.27

Calculate the activity rates for assigning costs to suppliers.
	Jones Glass		Claro Glass
	Side	WS	Side	WS
Adverse purchases:
$80 x 750	$60,000
$80 x 750		$60,000
$80 x 3900			$312,000
$80 x 3900				$312,000
Returns
$26 x 425	$11,050
$26 x 425		$11,050
$26 x 1000			$26,000
$26 x 1000				$26,000
Total costs	$71,050	$71,050	$338,000	$338,000
Units	÷15,000	÷15000	÷30000	÷30000
Unit cost	$4.74	$4.74	$11.27	$11.27
Unit purchase cost	$70	$145	$67	$142
Total unit cost	$74.74	$149.74	$78.27	$153.27