Question

1. Calculate the cost per component for each supplier, taking into consideration the costs of the supplier-related activities and current prices and sales volume. (Note: Round the intermediate calculations to the whole number for the following activity rate "Reworking products" and "Warranty work". Round the unit cost to two decimal places.) Manzer Inc. per unit Buckner Company per unit 2a. Suppose that Bowman loses $5,056,000 in sales per year because it develops a poor reputation due to defective units attrib to failed components. Using warranty hours, assign the cost of lost sales to each supplier Manzer Buckner 2b. By how much would this change the cost of each supplier's component? Round your answers to the nearest cent. Manzer unit cost increase ✓ Buckner unit cost increase 3. Based on the analysis in Requirements 1 and 2, discuss the importance of activity-based supplier costing for internal decision making. As with product costing, accurate assignment of costs to the cost object is essential for well-grounded decision making Suppliers ca cause a firm to perform costly activities such as inspection, rework, and warranty work. The total cost of a component is thus more than its purchase price. As this example shows, the component with the higher price is actually less expensive because la Causes es demand on Internal costly activities. Thus, the company would likely decrease the purchases of the one supplier in (Previous New Check My World

Answer 1

$ 7,95,000.00 i. Inspecting Components (A) Sampling hours (B) Manzer Inc Buckner Co. Cost per Sampling hours (A/B) 80 3920 4000 198.75 $ 59,20,000.00 ii. Reworking Products cost (A) Rework hours (B) Manzer Inc Buckner Co. Cost per Rework hours (A/B) 360 5640 6000 986.67 $ 1,21,70,000.00 (A) (B) iii. Warranty work Warranty hours Manzer Inc Buckner Co. Cost per Rework hours 800 15200 16000 760.63 (A/B) 15 Manzer 199.00 Buckner 86.00 3200000 27,52,00,000 7,79,100.00 Requirement 1: Computation of cost per component Manzer Inc Uniit price (a) 89.00 $ Number of units (b) 800000 (a xb) 7,12,00,000 $ Inspecting components Manzer ($198.75 x 80) $ 15,900.00 Buckner ($198.75 x 3920) $ Reworking Product costs Manzer ($986.67 x 360) $ 3,55,201.20 Buckner ($986.67 x 5640) $ Warranty works Manzer ($760.63 x 800) $ 6,08,504.00 Buckner ($760.63 x 15200) $ Total Costs 7,21,79,605 $ Per unit cost (c/b) $ 90.22 $ 55,64,818.80 (c) 1,15,61,576.00 29,31,05,495 91.60

Requirement 2a. $5056000 is loss in sales due to defective units hence it will be allocated between suppliers on the basis of Warranty-hours Loss in Sales (a) $ 50,56,000.00 Rework hours (b) Manzer Inc 800 Buckner Co. 15200 16000 Loss allocated per hour (a/b) 316.00 Loss allocation to suppliers: Manzer Inc. ($316 x 800) Buckner Co. ($316 x 15200) 2,52,800 48,03,200 Requirement 2b. Computation per unit loss allocation: Manzer Inc. ($252,800 / 800,000 units) $ Buckner Co. ($4,803,200 / 3,200,000 units) $ Therefore, Manzer unit cost Increase Buckner unit cost Increase 0.32 1.50 0.32 1.50 New Costs will be Manzer Buckner $ 90.54 93.10

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