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 cost of each supplier by using ABC. Round Test and Reorder rates to the nearest dollar, and final answers to the nearest cent. Alpha Electronics La Paz Company 125X 30Y 125X 30Y Unit cost: X

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 cost of each supplier by using ABC. Round Test and Reorder rates to the nearest dollar, and final answers to the nearest cent. Alpha Electronics La Paz Company 125X 30Y 125X 30Y Unit cost: X

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 4CE: Larsen, Inc., produces two types of electronic parts and has provided the following data: There are...

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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. 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…
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…
Brandon Technology makes two models of a specialized sensor for the aerospace Industry. The difference in the two models relates to the required accuracy of the sensor. The Standard model is used for most normal operations while the High-Performance model is used for high-altitude and specialized missions. Before shipment, the two models are passed through a machine that, among other things, certifies the accuracy of the sensor. The company only has one testing machine. The price and costs of the two sensor models are shown here: Price per sensor Standard $ 52 $ 34 0.04 Variable cost per sensor Testing hours per sensor The testing machine used for both models has a capacity of 8.250 hours annually. Fixed manufacturing costs are $2,400,000 annually. Required: a. Suppose that the maximum annual unit sales that is possible for Brandon Technology is 250,000 units of the Standard model and 80,000 of the High-Performance model. How many units of each sensor model should Brandon Technology…
Brandon Technology makes two models of a specialized sensor for the aerospace industry. The difference in the two models relates to the required accuracy of the sensor. The Standard model is used for most normal operations while the High-Performance model is used for high-altitude and specialized missions. Before shipment, the two models are passed through a machine that, among other things, certifies the accuracy of the sensor. The company only has one testing machine. The price and costs of the two sensor models are shown here: Standard High-Performance Price per sensor $ 52 $ 96 Variable cost per sensor $ 34 $ 41 Testing hours per sensor 0.04 0.11 The testing machine used for both models has a capacity of 8,250 hours annually. Fixed manufacturing costs are $2,400,000 annually. Required: a. Suppose that the maximum annual unit sales that is possible for Brandon Technology is 250,000 units of the Standard model and 80,000 of the High-Performance model. How many…
Hales Company produces a product that requires two processes. In the first process, a subassembly is produced (subassembly A). In the second process, this subassembly and a subassembly purchased from outside the company (subassembly B) are assembled to produce the final product. For simplicity, assume that the assembly of one final unit takes the same time as the production of subassembly A. Subassembly A is placed in a container and sent to an area called the subassembly stores (SB stores) area. A production Kanban is attached to this container. A second container, also with one subassembly, is located near the assembly line (called the withdrawal store). This container has attached to it a withdrawal Kanban. Required: 1. Explain how withdrawal and production Kanban cards are used to control the work flow between the two processes. How does this approach minimize inventories? 2. Explain how vendor Kanban cards can be used to control the flow of the purchased subassembly. What implications does this have for supplier relationships? What role, if any, do continuous replenishment and EDI play in this process?
Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?
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Recently, Mewah Designs expanded its market by becoming an original equipment supplier toJee Wrangler. Mewah Designs produces factory upgraded speakers specifically for JeeWrangler. The Kicker components and speaker cabinets are outsourced with assemblyremaining in-house. Mewah Designs assemble the product by placing the speakers and othercomponents in cabinets that define an audio package upgrade and that can be placed into theJee Wrangler, producing the desired factory-installed appearance. Speaker cabinets andassociated Kicker components are added at the beginning of the assembly process.Assume that Mewah Designs uses the weighted-average method to cost out the audio package.The following are cost and production data for the assembly process for April: Production:Units in process, April 1, 60% complete 60,000Units completed and transferred out 150,000Units in process, April 30, 20% complete 30,000Costs:WIP, April 1:Cabinets RM 1,200,000Kicker components RM 12,600,000Conversion costs…
The jarvis corporation produces bucket loader assemblies for the tractor industry. The product has a long term life expectancy. Jarvis has a traditional manufacturing and inventory system. Jarvis is considering the installation of a just-in-time inventory system to improve its cost structure. In doing a full study using its manufacturing engineering team as well as consulting with industry JIT experts and the main vendors and suppliers of the components Jarvis uses to manufacture the bucket loader assemblies, the following incremental cost-benefit relevant information is available for analysis: The Jarvis cost of investment capital hurdle rate is 15%. One time cost to rearrange the shop floor to create the manufacturing cell workstations is $275,000. One time cost to retrain the existing workforce for the JIT required skills is $60,000. Anticipated defect reduction is 40%. Currently there is a cost of quality defect assessment listed as $150,000 per year. The setup time for…
Meagher Solutions Inc. manufactures memory chips for personal computers. An activity analysis was conducted, and the following activity costs were identified with the manufacture and sale of memory chips: a. Identify the cost of quality classification for each activity. Quality Activities Correct shipment errors Disposing of scrap Emergency equipment maintenance Employee training Final inspection Inspecting incoming materials Preventive equipment maintenance Processing customer returns Scrap reporting Supplier development Warranty claims. Total Quality Cost Classification Prevention b. Prepare a cost of quality report. Assume that the sales for the period were $4,000,000. If required, round percents to one decimal place. Activity Cost Appraisal Internal failure External failure Total $150,000 95,000 125,000 50,000 80,000 60,000 40,000 90,000 45,000 15,000 250,000 $1,000,000 Meagher Solutions Inc. Cost of Quality Report Percent of Total Quality Cost Quality Cost % % % % Quality Cost…