Activity$-$Based Supplier Costing

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

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

products" and "Warranty work". Round the unit cost to two decimal places.$)$

$2$a$.$ Suppose that Noguchi loses $$5,040,000$ in sales per year because it develops a poor reputation due to defective units attributable to failed components. Using warranty hours, assign the 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

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

As with product costing, accurate assignment of costs to the cost object is essential for well$-$grounded decision$-$making. Suppliers can cause a firm to perform costly activities such as inspection, 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 domand on internal costly activities. Thus, the company would likely

: the purchasas of 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.