Question

Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 307. Consider two activities: testing components and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working properly. Reordering occurs because one or both of the components have failed the test and it is necessary to replenish component inventories. Activity cost information and other data needed for supplier costing are as follows: I. Activity Costs Caused by Suppliers (testing failures and reordering as a result) Costs Activity Testing components Reordering components $1,200,000 300,000 II. Supplier Data Alpha Electronics La Paz Company 125X 30Y 125x 30Y Unit purchase price $10 $26 $12 $28 Units purchased 120,000 77,500 15,000 15,000 Failed tests 1,700 780 10 10 Number of reorders 60 40 0 0 Required: Determine the cost of each supplier by using ABC. Round Test and Reorder rates to the nearest dollar, and final answers to the nearest cent. Alpha Electronics La Paz Company 125X 30Y 125X 30Y Unit cost: 12.35 х $ 28.35 х

Answer 1

Correct Answer is :

	Alpha Electronics	La Paz Company
	125X	30Y	125X	30Y
Unit cost	18.30	32.38	12.32	28.32

Working/ explanation:

		Alpha Electronics	La Paz Company	Total
		125X	30Y	125X	30Y
A	Testing component cost	1200000				1200000
B	Failed Test	1700	780	10	10	2500
C = (120,000/2100)	Cost per test					480
D 1= (B* 480)	Testing component cost	816000	374400	4800	4800
A	Reordering cost	300000				300000
B	reorders	60	40	0	0	100
C (300000/100)	Cost per reoder					3000
D 2= (B* 480)	Reordering cost	180000	120000	0	0
E = D1 + D2	Total Cost	996000	494400	4800	4800	1500000
F	Units purchased	120000	77500	15000	15000
G = E/F	Cost per unit	8.30	6.38	0.32	0.32
H	Purchase price	10	26	12	28
G+H	Total cost per unit	18.30	32.38	12.32	28.32