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5.4

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 reliabie and seldom deliver iate; however, Manzer sells the component for $89 per unit, while Buckner sells the same component for $86. Noguchi purchases 80%6 of its components from Buckner because of its fower price. The total annual dernand is 4,000,000 components. To help assess the cost effect of the two components, the following data were coliected for suppiser-related activities and suppliers: 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.) 2a. Suppose that Noguchi loses $4,464,000 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. Manter Buckner 2b. By how much would this change the cost of each supplier's component? Round your answers to the nearest cent. Manzer Buckner 3. Based on the analysis in Requirements 1 and 2 , discuss the importance of activity-based supplier costing for internal decision making: As wath product costing, accurate astignment of costs to the cost pbject is essential for well-grounded decision-making. Suppliers can cause a firm to perform costly activities such as inspection, fework, and warranty work. The of a comperent is thus more than its purchase price. As this example shows, the comporient with the price is actualy less expensive because it causey less demand on internal costiy activities, Thus, the company would Iikely the purchates of one supplier in favor of the other. It also might attempt to work with the one supplier which is causing significant demands on internal activities to see if the quality of its component can be increased