Activity$-$Based Supplier Costing

Bowman Company manufactures cooling systems. Bowman produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $$89$ per unit, while Buckner sells the same component for $$86.$ Bowman purchases $80\%$ of its components from Buckner because of its lower price, The total annual demand is $4,000,000$ components.

To help assess the cost effect of the two components, the following data were collected for supplier$-$related activities and suppliers:

I. Activity Data

Activity Cost

Inspecting components $($sampling only$)$

$$650,000$

Reworking products $($due to failed component$)$

$7,670,000$

Warranty work $($due to failed component$)$

$11,270,000$

II$.$ Supplier Data

$\backslash$table$[[,$Manzer Inc.,$\backslash$table$[[$Buckner$],[$Company$]]],[$Unit purchase price,$$89,$$$86$