Question

Activity-Based Supplier Costing 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 30Y. 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) Activity Testing components Costs $1,200,000 300,000 Reordering components II. Supplier Data La Paz Company 125x 30Y Unit purchase price $12 $28 Alpha Electronics 125X 30Y $10 $26 120,000 79,400 1,200 780 6040 15,000 15,000 Failed tests 10 10 0 Number of reorders 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 125X 30Y X $ La Paz Company 125X 307 $ Unit cost: $ X $0

Answer 1

ACTIVITY PRICE QUANTITY COMPANY A (P*Q) 125X 30Y COMPANY LA (Pºoj 125X 30V PURCHASE COMPONENTS 1200000 1560000 10 26 12 28 120000 60000 15000 15000 180000 420000 TESTING COMPONENTS 600 720000 1200 780 600 468000 600 10 6000 10 6000 600 180000 REORDERING COMPONENTS 3000 3000 120000

ACTIVITY BASED COSTING ACTIVITY BASED COSTING IS AN APPORTIONMENT OF COSTS THAT FIRST CONSIDERS THE ACTIVITY DRIVERS THAT HELPS IN THE ALLOCATION OF COST TO VARIOUS 6 ACTIVITIES AND THEN ALLOCATES COST TO DIFFERENT COST OBJECT BY USING DRIVERS