Montel Enterprises manufactures special tiles. The managing director, David Jones, is concerned that the total number of suppliers that they currently deal with is adding unnecessary cost to the business. Currently they are dealing with 10 suppliers. David has asked you, as the new accounting graduate to investigate this. You have decided to undertake an activity-based analysis of supplier costs and supplier performance, and will focus initially on 2 suppliers of silica sand.

The following cost information has been gathered based on previous dealings with supplier A and B.

Activity	Cost per unit of activity
Order materials	$200
Receive order	$500 per delivery
Inspect order	$150 per delivery
Pay supplies	$70
Dispute invoice amount	$350 per dispute

The two suppliers consumed the following number of activities

Activity	Supplier A	Supplier B
Order materials	20	50
Receive order	20	79
Inspect order	6	26
Pay supplies	14	50
Dispute invoice amount	3	0

Materials purchased information over the past year was as follows:

Supplier A: 12 000 bags @ $5 per bag

Supplier B: 20 000 bags @ $6 per bag

Required:

1. Calculate the total cost of ownership for supplier A and B. (3 marks)

2. Calculate the supplier performance index for supplier A and B. (2 marks)

3. Which supplier do you recommend Montel Enterprises stop dealing with and why. (2 mark)