Exercise $10-40$ & $10-41($Algo$)($LO $10-3,4)$

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Ellery Products manufactures various components for the fashion industry. Ellery buys fabric from two vendors: Ewers Textiles and Bramford Materials. Ellery chooses the vendor based on price. Once the fabric is received, it is inspected to ensure that it is suitable for manufacturing purposes. Ellery disposes of fabric that is deemed unsuitable.

The controller at Ellery collected the following information on purchases for the past quarter:

Ewers Bramford

Total purchases $($yards$)21,40038,500$

Fabric discarded $($yards$)1,0704,620$

The purchasing manager has just received bids on an order for $800$ yards of fabric from both Ewers and Bramford. Ewers bid $$2,565$ and Bramford bid $$2,486.$

Exercise $10-40($Algo$)$ Activity$-$Based Costing of Suppliers $($LO $10-3,4)$

Required:

$1-$a$.$ Assume that the average quality, measured by the amounts discarded from the two companies, will continue as in the past. What is the effective cost per $800$ yards for both Ewers and Bramford?

$1-$b$.$ Which supplier would you recommend that the purchasing manager select?