Activity-Based Supplier Costing Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in the manufacture of its permanent- magnet motors: Part #625 and Part #827. Consider two activities: testing parts and reordering parts. After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part 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 Costs Testing parts $4,500,000 Reordering parts 1,125,000 II. Supplier Data Otavalo Manufacturing Piura Company Part #625 Part #827 Part #625 Part #827 Unit purchase price $30 $78 $36 $84 Units purchased 450,000 225,000 56,250 56,250 Failed tests 4,500 2,925 39 36 Number of reorders 225 150 Required: Determine the cost of each supplier by using ABC. Round unit costs to two decimal places. otavalo Manufacturing Piura Company Part #625 $ Part#827 Feedback Check My Work The unit cost includes the unit purchase price and any activity costs caused by suppliers. The first step is to determine the rates for activities caused by suppliers by dividing the activity costs by the total number of activity drivers. Next, apply those activity rates to the activity drivers to determine the additional cost caused by suppliers and add those costs to purchase costs to determine the total cost per product. Then, divide total product cost by the number of units to determine unit cost by product. Activity-Based Supplier Costing Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in the manufacture of its permanent- magnet motors: Part #625 and Part #827. Consider two activities: testing parts and reordering parts. After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part 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 Costs Testing parts $4,500,000 Reordering parts 1,125,000 II. Supplier Data Otavalo Manufacturing Piura Company Part #625 Part #827 Part #625 Part #827 Unit purchase price $30 $78 $36 $84 Units purchased 450,000 225,000 56,250 56,250 Failed tests 4,500 2,925 39 36 Number of reorders 225 150 Required: Determine the cost of each supplier by using ABC. Round unit costs to two decimal places. otavalo Manufacturing Piura Company Part #625 $ Part#827 Feedback Check My Work The unit cost includes the unit purchase price and any activity costs caused by suppliers. The first step is to determine the rates for activities caused by suppliers by dividing the activity costs by the total number of activity drivers. Next, apply those activity rates to the activity drivers to determine the additional cost caused by suppliers and add those costs to purchase costs to determine the total cost per product. Then, divide total product cost by the number of units to determine unit cost by product