Question

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 744,000 Adverse buying* Supplier returns** 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 Claro Glass Unit purchase price Units purchased Insufficient units Jones Glass Sidews $70 $145 15,000 15,000 750 750 425 425 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 $ per adverse purchase Supplier return rate $ per return

Answer 1

1)

adverse buying rate = 744,000 / 9,300*

= 80 per adverse purchase

* total of insufficient units

supplier return rate = 74,100 / 2,850*

= 26 per return

* total of returned units

2)

	jones glass		claro glass
	side	ws	side	ws
purchase price	10,50,000	21,75,000	20,10,000	42,60,000
adverse buying	60,000	60,000	3,12,000	3,12,000
suppliers return	-11,050	-11,050	-26,000	-26,000
total unit purchasing cost	10,98,950	22,23,950	22,96,000	45,46,000