Fabulous Enterprises manufactures modular kitchens and bathrooms and the Managing Director. Alfred Jones, is concerned that the

Question:

Fabulous Enterprises manufactures modular kitchens and bathrooms and the Managing Director. Alfred Jones, is concerned that the total number of suppliers has increased from 20 to 60 over the past three years. He is sure that this is inefficient and has asked you as the new management accountant to investigate this. You have decided to undertake an activity-based analysis of supplier costs and supplier performance, and will focus initially on the four suppliers of wall and floor tiles. After much discussion with managers and an analysis of costs and activities over the past year, you have isolated supplier-related activities, identified activity drivers, and estimated the cost per unit of activity driver:
Activity Cost per unit of activity driver

Order material Receive order Inspect order Return material to supplier Downtime due to late delivery Rework due to low q

Over the past year, the four suppliers of tiles consumed the following number of activities:
Activity A B C D

Order material Receive order 20 50 30 10 20 80 10 20 25 5 Inspect order Return material to supplier Downtime due to late

A supplier relationship manager is employed to manage a range of suppliers, at a salary of $90 000. The proportion of her time that she spends managing tiling suppliers is as follows: 10 percent on supplier A: 15 percent on supplier B; 10 percent on supplier C; 5 percent on supplier D. The cost of material purchased from each supplier over the past year was as follows: A $60 000; B $120 000; C $70 000; and D $30 000.
Required:
1. Using a format similar to that of Exhibit 15.3, calculate the total cost of ownership, and use supplier performance index, for each of the four suppliers.
2. Discuss the relative performance of each supplier.
3. Suggest three non-financial performance measures that could be used to assess the performance suppliers.