Exercise 7-15 Activity-Based Supplier Costing Seabrook Company manufactures heating systems. Seabrook produces all the parts OBJECTIV necessary for its product except for one electronic component, which is purchased from two local suppliers: Wood Inc. and Forest Company. Both suppliers are reliable and seldom deliver late; however, Wood sells the component for $48 per unit, while Forest sells the same component for $43. Seabrook purchases 80 percent of its components from Forest because of its lower price. The total annual demand is 2,000,000 components. To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers: I. Activity Data Inspecting components (sampling only) Reworking products (due to failed component) Warranty work (due to failed component) Activity Cost ($) 240,000 3,042,000 4,800,000 II. Supplier Data Wood Inc. Forest Company Unit purchase price Units purchased Sampling hours * Rework hours Warranty hours $48 400,000 40 180 400 $43 1,600,000 1,960 2,820 7,600 Supplier costs: Inspecting components activity rate $ - per sampling hour. Reworking products activity rate $ per rework hour. Warranty work activity rate $ D] per warranty hour. The cost per component by supplier is: Wood total supplier cost is $ A Wood per unit cost if $ Forest total supplier cost is $ AJ Forest per unit cost is $ Part 2: Using warranty hours, the rate is $ A/ per warranty hour. The costs assigned to each component would be: Wood $ AJ Forest $