Activity-Based Suppler CostingClearound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30%. Consider two activities: testing componentsand reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working properly. Reordering occurs because one or both of the componentshave failed the test and it is necessary to replenish component inventories. Activity cost information and other data needed for supplier costing are as follows:1. Activity Cests Caused by Suppliers (testing failures and reordering as a result)ActivityTesting componentsReandering componentsII. Supplier DataUnit purchase priceUnits purchasedUnit costAlpha Electronics125X$10120,0001,60060125X11.57$4,7007004030V$2630VFailed testsNumber of reordersRequired:Determine the cost of each supplier by using ABC Reund Test and Reorder rates to the nearest dollar and final answers to the nearest centAlpha ElectronicsLa Par Company27Costs$1,200,000300,000La Par Company125X304$1215,000100$2815,00010O125X12.0030720

ABC means activity based costing system of costing. Under this system, all type of overhead and…

Activity-Based Suppler Costing Clearounduses Alpha Electronics and La Par Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30%. Consider ten activities: testing componen and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working property. Reordering occurs because one or both of the components have falled the test and it is necessary to replenish component inventories Activity cost information and other data needed for supplier costing are as foliows: 1. Activity Cests Caused by Suppliers (testing failures and reardering as a result) Activity Testing components Reordering components II. Supplier Data Unit purchase price Units purchased Failed tests Number of reorders Required: Unit cost Alpha Electronics 125X $10 120,000 1,600 125x 11.57 60 304 $26 4,700 700 40 304 Costs $1,200,000 300,000 27 La Pax Company 125X $12 15,000 10 0 Determine the cost of each supplier by using ABC Round Test and Reorder rates to the nearest dollac, and final answers Alpha Electronics La Par Company 301 $26 15,000 125X 12.00 10 0 30V 28 the nearest cent

Activity-Based Suppler Costing Clearounduses Alpha Electronics and La Par Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30%. Consider ten activities: testing componen and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working property. Reordering occurs because one or both of the components have falled the test and it is necessary to replenish component inventories Activity cost information and other data needed for supplier costing are as foliows: 1. Activity Cests Caused by Suppliers (testing failures and reardering as a result) Activity Testing components Reordering components II. Supplier Data Unit purchase price Units purchased Failed tests Number of reorders Required: Unit cost Alpha Electronics 125X $10 120,000 1,600 125x 11.57 60 304 $26 4,700 700 40 304 Costs $1,200,000 300,000 27 La Pax Company 125X $12 15,000 10 0 Determine the cost of each supplier by using ABC Round Test and Reorder rates to the nearest dollac, and final answers Alpha Electronics La Par Company 301 $26 15,000 125X 12.00 10 0 30V 28 the nearest cent

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 22E: Silven Company has identified the following overhead activities, costs, and activity drivers for the...

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Activity-Based Supplier Costing Clear sound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30Y. Consider two activities: testing components and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working properly. Reordering occurs 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) Activity Costs Testing components $1,200,000 Reordering components 300,000 II. Supplier Data Alpha Electronics La Paz Company 125X 30Y 125X 30Y Unit purchase price $10 $26 $12 $28 Units purchased 120,000 68,100 15,000 15,000 Failed…
Activity-Based Supplier Costing Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30Y. Consider two activities: testing components and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working properly. Reordering occurs 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) Activity Costs Testing components $1,200,000 Reordering components 300,000 II. Supplier Data Alpha Electronics La Paz Company 125X 30Y 125X 30Y Unit purchase price $10 $26 $12 $28 Units purchased 120,000 60,000 15,000 15,000 Failed…
Activity-Based Supplier Costing Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30Y. Consider two activities: testing components and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working properly. Reordering occurs 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) Activity Costs Testing components $1,200,000 Reordering components 300,000 II. Supplier Data Alpha Electronics La Paz Company 125X 30Y 125X 30Y Unit purchase price $10 $26 $12 $28 Units purchased 120,000 80,300 15,000 15,000 Failed tests 1,300 780 10 10 Number of reorders 60 40 Required: Determine the…
Activity-Based Supplier Costing Clearsound uses Alpha Electronics and La Paz company to buy two electronic components used in the manufacture of its cell phones: Component 125X and component 30Y. Consider two activities: Testing components and reordering components. After the two components are inserted, Testing is done to ensure that the two components in the phones are working properly. Reordering occurs because one or both of the components have failed the test and it is necessary to replenish component inventories. Acitivity cost information and other data needed for supplier costing are as follows: 1. Activity costs caused by suppliers(testing failures and reordering as a result) Required : Determine the cost of each supplier by using ABC. Round Unit costs to two decimal places.
Activity-Based Supplier Costing Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30Y. Consider two activities: testing components and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones are working properly. Reordering occurs 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) Activity Costs Testing components $1,200,000 Reordering components 300,000 II. Supplier Data Alpha Electronics La Paz Company 125X 30Y 125X 30Y Unit purchase price $10 $26 $12 $28 Units purchased 120,000 77,800 15,000 15,000 Failed tests…
Bigdeal Corporation manufactures paper and paper products and istrying to decide whether to purchase Smalltek Company. Smalltek has developed a process for manufacturing boxes that can replace containers that use fluorocarbons for expelling a liquid product. The price may be as high as $45 million. Bigdeal prefers to buy Smalltek and integrate its products while leaving the Smalltek management in charge of day-to-dayoperations. A major consideration is the efficiency and effectiveness of Smalltek’s operations. Bigdeal wants to obtain a report on the operational efficiency and effectiveness of the Smalltek sales, production, and research and development departments.Required:Who can Bigdeal engage to produce the report resulting from this operational audit? Several possibilities exist. Are there any particular advantages or disadvantages in choosing from among them?
Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with the Salem brand name. Owner Kenneth Booth was interested in the possibility. Before any commitment was made, however, Kenneth wanted to know what the incremental fixed costs would be and how many radios must be sold to cover these costs. In response, Betty Johnson, the marketing manager, gathered data for the current products to help in projecting overhead costs for the new product. The overhead costs based on 30,000 direct labor hours follow. (The high-low method using direct labor hours as the independent variable was used to determine the fixed and variable costs.) All depreciation. The following activity data were also gathered: Betty was told that a plantwide overhead rate was used to assign overhead costs based on direct labor hours. She was also informed by engineering that if 20,000 radios were produced and sold (her projection based on her marketing study), they would have the same activity data as the recorders (use the same direct labor hours, machine hours, setups, and so on). Engineering also provided the following additional estimates for the proposed product line: Upon receiving these estimates, Betty did some quick calculations and became quite excited. With a selling price of 26 and just 18,000 of additional fixed costs, only 4,500 units had to be sold to break even. Since Betty was confident that 20,000 units could be sold, she was prepared to strongly recommend the new product line. Required: 1. Reproduce Bettys break-even calculation using conventional cost assignments. How much additional profit would be expected under this scenario, assuming that 20,000 radios are sold? 2. Use an activity-based costing approach, and calculate the break-even point and the incremental profit that would be earned on sales of 20,000 units. 3. Explain why the CVP analysis done in Requirement 2 is more accurate than the analysis done in Requirement 1. What recommendation would you make?
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Keith Golding has decided to purchase a personal computer. He has narrowed his choices to two: Brand A and Brand B. Both brands have the same processing speed, hard disk capacity, RAM, graphics card memory, and basic software support package. Both come from companies with good reputations. The selling price for each is identical. After some review, Keith discovers that the cost of operating and maintaining Brand A over a three-year period is estimated to be 200. For Brand B, the operating and maintenance cost is 600. The sales agent for Brand A emphasized the lower operating and maintenance cost. She claimed that it was lower than any other PC brand. The sales agent for Brand B, however, emphasized the service reputation of the product. She provided Keith with a copy of an article appearing in a PC magazine that rated service performance of various PC brands. Brand B was rated number one. Based on all the information, Keith decided to buy Brand B. Required: 1. What is the total product purchased by Keith? 2. Is the Brand A company pursuing a cost leadership or differentiation strategy? The Brand B company? Explain. 3. When asked why he purchased Brand B, Keith replied, I think Brand B offered more value than Brand A. What are the possible sources of this greater value? If Keiths reaction represents the majority opinion, what suggestions could you offer to help improve the strategic position of Brand A?
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