Question

Activity-Based Supplier Costing Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in the manufacture of its permanent magnet motors: Part #625 and Part #827. Consider two activities: testing parts and reordering parts. After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part inventories. Activity cost information and other data needed for supplier costing are as follows: 1. Activity Costs Caused by Suppliers (testing failures and reordering as a result) Activity Costs Testing parts $4,500,000 Reordering parts 1,125,000 11. Supplier Data Otavalo Manufacturing Piura Company Part #625 Part #827 Part #625 Part 827 Unit purchase price $30 $78 $36 $84 Units purchased 450,000 225,000 56.250 56,250 Failed tests 4,500 2,925 39 36 Number of reorders 225 150 0 0 Required:

Answer 1

Please find the attached sheets for detailed answer,

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Summary-

FIrst the overhead cost has to be allocated on the product based on cost driver,then this determined cost will be allocated to the respective product.Total cost will be calculated and then unit cost,

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X х - Cla 9.aug - Microsoft Excel Home Insert Page Layout Formulas Data Review View X 4 Cut Times New Rom - 11 - A A A 2 Wrap Text General AutoSum - Fill Eg Copy Paste BI U *Merge & Center +.0.00 .00 0 Insert Delete Format Format Painter Conditional Format Cell Formatting as Table Styles Styles 2 Clear Sort & Find & Filter - Select Clipboard Font Alignment Number Cells Editing E16 fax A B C D E F G H I J K L M N 0 P 1 2 Activiy Based rate- 3 4 5 Cost Cost Driver Cost Driver Rate per activity Testing 4500000 Total failed test 7500 600 Reordering parts 1125000 Total No. of reorder 375 3000 6 Allocation based on Activity- Otavalo Manufacturing Piura Company 625 827 625 827 Total Purchase price 13500000 17550000 2025000 4725000 Testing Cost 2700000 1755000 23400 21600 Reordering cost 675000 450000 0 Total Cost of purchase 16875000 19755000 2048400 4746600 Number of units procured 450000 225000 56250 56250 Per unit cost 37.5 87.8 36.416 84.384 7 8 9 10 11 Solution 12 Piura Company 13 Part 625 Part827 Otavalo Manufacturing 37.5 87.8 36.416 84.384 Better Piura Piura 14 15 16 17 18 19 20 21 22 23 24 25 Sheet1 Sheet2 Sheet4 Sheet3 Sheet6 Sheet9 Sheets Sheetz Sheets Sheet10 Sheet10 Sheet14 Sheet13 | Ready BO 100% + O X 08:03 24-09-2020

X х X 123 fr Σ L Cin 9.aug - Microsoft Excel Home Insert Page Layout Formulas Data Review View Pa Define Name - Trace Precedents Show Formulas Calculate Now Use in Formula Trace Dependents Error Checking Insert AutoSum Recently Financial Logical Text Date & Lookup & Math More Name Watch Calculation Calculate Sheet Function Used - Time Reference & Trig. Functions Manager Create from Selection Remove Arrows Remove Arrows - Evaluate Formula Evaluate Formula Window Options Function Library Defined Names Formula Auditing Calculation F16 foc A B С D E F G H 1 J K 1 2 Activiy Based rate- Allocation based on Activity- 3 Testing Reordering parts Otavalo Manufacturing Piura Company 4 Cost 4500000 1125000 625 827 625 827 5 Cost Driver Total failed test Total No. of reorder Total Purchase price =30*450000 =78*225000 =36*56250 =84*56250 6 =+B5 =4500+2925+39+36 =225+150 Testing Cost =+C7*4500 =+C7*2925 =+C7*39 =+C7*36 7 Rate per activity =+C4/C6 =+D4/D6 Reordering cost =+D7*225 =+D7*150 0 0 8 Total Cost of purchase =SUM(G5:G7) =SUM(H5:H7) =SUM(15:17) =SUM(J5:37) 9 Number of units procured 450000 225000 56250 56250 10 Per unit cost =+G8/G9 =+H8/H9 =+18/19 =+J8/J9 11 Solution 12 =+G3 =+13 Better 13 Part 625 =+G10 =+110 Piura 14 Part827 =+H10 =+J10 Piura 15 16 17 18 19 20 21 22 23 24 25 Sheet1 Sheet2 Sheet4 Sheet3 Sheet6 Sheet9 Sheets Sheet7 Sheetz Sheets Sheet10 Sheet10 Sheet14 Sheet13 | Ready BO 100% + O X2 08:04 24-09-2020