Question
Noguchi Company manufactures cooling systems. Noguchi produces all the parts necessary for its product except for one electronic component, which is purchased from two local
Noguchi Company manufactures cooling systems. Noguchi produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Noguchi purchases 80% of its components from Buckner because of its lower price. The total annual demand is 4,000,000 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
Line Item DescriptionActivity CostInspecting components (sampling only)$830,000Reworking products (due to failed component)6,820,000Warranty work (due to failed component)9,170,000II. Supplier Data
Line Item DescriptionManzer Inc.Buckner CompanyUnit purchase price$89$86Units purchased800,0003,200,000Sampling hours*803,920Rework hours3605,640Warranty hours80015,200* Sampling inspection for Manzer's product has been reduced because the reject rate is so low.
Required:
1. Calculate the cost per component for each supplier, taking into consideration the costs of the supplier-related activities and using the current prices and sales volume. (Note: Round the intermediate calculations to the whole number for the following activity rates: "Reworking products" and "Warranty work". Round the unit cost to two decimal places.)
Line Item DescriptionCostManzer Inc.$fill in the blank 1per unitBuckner Company$fill in the blank 2per unit2a. Suppose that Noguchi loses $6,000,000 in sales per year because it develops a poor reputation due to defective units attributable to failed components. Using warranty hours, assign the cost of lost sales to each supplier.
Line Item DescriptionCostManzer$fill in the blank 3Buckner$fill in the blank 42b. By how much would this change the cost of each supplier's component? Round your answers to the nearest cent.
Line Item DescriptionChangeCostManzerunit cost decreaseunit cost increase$fill in the blank 6Bucknerunit cost decreaseunit cost increase$fill in the blank 8Step by Step Solution
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