Activity$-$Based Supplier Costing

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

II$.$ Supplier Data

Manzer Inc.

Buckner

Company

Sampling inspection for Manzer's product has been reduced because the reject rate is so low.

Required:

intermediate calculations to the whole number for the following activity rates: "Reworking products" and "Warranty work". Round the unit cost to two decimal places.$)$

Manzer Inc.

ser unit

Buckner Company

$

per unit

cost of lost sales to each supplier.

Manzer $,$$

Buckner $,$$

$2$b$.$ By how much would this change the cost of each supplier's component? Round your answers to the nearest cent.

Manzer

$

Buckner

$

Based on the analysis in Requirements $1$ and $2,$ discuss the importance of activity$-$based supplier costing for internal decision making.

rework, and warranty work. The

of a component is thus more than its purchase price. As this example shows, the component with the

price is

actually less expensive because it causes less demand on internal costly activities. Thus, the company would likely

the purchases of the one supplier in favor of the other.

It also might attempt to work with the one supplier which is causing significant demands on internal activities to see if the quality of its component can be increased.