FOLEO FONES CASE STUDY - Chapter 5: Assume you are the management accountant for the Foleo Group. Tracey Chen, the CFO, has called you into a meeting, to discuss the performance of the various components suppliers of the Foleo Fones business unit. After his last meeting with the Production Manager, Allan Raymond, the Business Unit GM, has supplied Tracey with the below data on their three component suppliers for the last two months. Tracey asks you to analyse this data and produce a report for a meeting next week, identifying any areas of concern. Cost per unit of Dependable Primary Speedy activity Components Parts Electronics Supplier Activities for last 2 months Unit Level: Reworking products due to poor quality materials $75 per unit 9,750 units 16,250 units 20,583 units Production downtime due to poor quality materials $220 per hour down 4 hours 7 hours 11 hours Extra machine set-ups due to late delivery of materials $365 per set-up 2 set-ups 25 set-ups 4 set-ups Order Level: Placing purchase order $24 per order 20 orders 5 orders 15 orders Receiving orders in warehouse $25 per payment 20 orders 5 orders 15 orders Inspecting orders in warehouse $21 per inspection 20 orders 5 orders 15 orders Processing payment to supplier $95 per payment 2 payments 2 payments 15 payments Supplier Level: Foleo Fones Production Manager - SRM $50,000 15% 25% 60% Supplier audits $35,000 33% 33% 34% Dependable Components Primary Parts Speedy Electronics Price & Quantity Purchased Data for last 2 months Average price per unit Quantity purchase in last 2 months $65 per component 15,000 units $50 per component 16,500 units $30 per component 30,000 units Primary Parts (2 mark) Speedy Electronics (a) Using the above data, calculate the Total Supplier Activity Costs for each supplier. Cost per unit of Dependable activity Components Supplier Activities for last 2 months Unit Level: Reworking products due to poor quality materials $75 per unit Production downtime due to poor quality materials $220 per hour down Extra machine set-ups due to late delivery of materials $365 per set-up Order Level: Placing purchase order $24 per order Receiving orders in warehouse $25 per payment Inspecting orders in warehouse $21 per inspection Processing payment to supplier $95 per payment Supplier Level: Foleo Fones Production Manager - SRM $50,000 Supplier audits $35,000 Total Supplier Activity Costs (b) Calculate the Supplier Performance Index for each supplier. (0.75 mark) (c) Prepare a report to Tracey based on your analysis & the case facts. In your report, comment on the relative performance of each supplier, identify any areas of concern, & provide a recommendation for the management of the component suppliers of Foleo Fones. (HINT: This is a report to the CFO, so it should be presented appropriately, so no dot points) (1.25 mark)
