OBJECTIVE $3$ Cornerstone Exercise $7-6$ Activity$-$Based Supplier Costing

CORNERSTONE $7\mathrm{.}6$ Webb Computers uses Alpha Electronics and Laval Company to buy two electronic components used in the manufacture of its computers: component $125x$ and component $30Y.$ Consider two activities: testing and reordering components. After the two components are inserted, testing is done to ensure that the two components in the computer are working properly. Reordering occurs

Chapter $7$ Activity$-$Based Costing and Management

because one or both of the components have failed the test and it is necessary to replenish component inventories. Activity cost information and other data needed for supplier costing are as follows:

I. Activity Costs Caused by Suppliers $($testing failures and reordering as a result$)$

$\backslash$table$[[$Activity$,$Costs $($$$)],[$Testing components,$600,000],[$Reordering components,$150,000]]$

II$.$ Supplier Data

$\backslash$table$[[,$Alpha Electronics,,Laval Company$],[,125x,30Y,,125x,30Y$