Jacaranda Builders is undertaking an analysis of supplier costs in order to evaluate the relative costs and performance of each supplier. They have isolated a range of activities that are consumed by suppliers, identified activity drivers, and estimated the cost per unit of activity driver for last year: Activity Cost per unit of activity driver Downtime due to poor quality material $200 per unit reworked Order material $250 per order Receive order $180 per delivery Inspect order $300 per delivery Return material to supplier $220 per return Pay supplier $190 per invoice Dispute invoiced amount $560 per dispute The three major suppliers to the company consumed the following numbers of activities: Activity Possum Timber Wombat Plumbing Emu Insulation Units reworked 10 Order material 40 48 30 Receive order 40 60 38 Inspect order 40 60 38 Return material to supplier 5 4 15 Pay supplier 12 48 12 Dispute invoiced amount 13 In addition, a supplier relationship manager (salary $90 000) was employed. It is estimated that 60 per cent of his time was spent serving Wombat Plumbing, and 40 per cent on the other two suppliers. The cost of material purchased from each supplier was as follows: Page 746 Possum Timber $120 000 Wombat Plumbing $150 000 Emu Insulation S 74 000 Required: 1. Calculate the total cost of ownership for each of the three suppliers, using a format similar to that shown in Exhibit 15.3 0. 2. Determine the supplier performance index for each supplier.
Jacaranda Builders is undertaking an analysis of supplier costs in order to evaluate the relative costs and performance of each supplier. They have isolated a range of activities that are consumed by suppliers, identified activity drivers, and estimated the cost per unit of activity driver for last year: Activity Cost per unit of activity driver Downtime due to poor quality material $200 per unit reworked Order material $250 per order Receive order $180 per delivery Inspect order $300 per delivery Return material to supplier $220 per return Pay supplier $190 per invoice Dispute invoiced amount $560 per dispute The three major suppliers to the company consumed the following numbers of activities: Activity Possum Timber Wombat Plumbing Emu Insulation Units reworked 10 Order material 40 48 30 Receive order 40 60 38 Inspect order 40 60 38 Return material to supplier 5 4 15 Pay supplier 12 48 12 Dispute invoiced amount 13 In addition, a supplier relationship manager (salary $90 000) was employed. It is estimated that 60 per cent of his time was spent serving Wombat Plumbing, and 40 per cent on the other two suppliers. The cost of material purchased from each supplier was as follows: Page 746 Possum Timber $120 000 Wombat Plumbing $150 000 Emu Insulation S 74 000 Required: 1. Calculate the total cost of ownership for each of the three suppliers, using a format similar to that shown in Exhibit 15.3 0. 2. Determine the supplier performance index for each supplier.
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Supplier Costs In Order To...
Jacaranda Builders is undertaking an analysis of supplier costs in order to evaluate the relative costs and performance of each
supplier. They have isolated a range of activities that are consumed by suppliers, identified activity drivers, and estimated the cost
per unit of activity driver for last year:
Activity
Cost per unit of activity driver
Downtime due to poor quality material
$200 per unit reworked
Order material
$250 per order
Receive order
$180 per delivery
Inspect order
$300 per delivery
Return material to supplier
$220 per return
Pay supplier
$190 per invoice
Dispute invoiced amount
$560 per dispute
The three major suppliers to the company consumed the following numbers of activities:
Activity
Possum Timber
Wombat Plumbing
Emu Insulation
Units reworked
10
2
Order material
40
48
30
Receive order
40
60
38
Inspect order
40
60
38
Return material to supplier
5
4
15
Pay supplier
12
48
12
Dispute invoiced amount
13
In addition, a supplier relationship manager (salary $90 000) was employed. It is estimated that 60 per cent of his time was spent
serving Wombat Plumbing, and 40 per cent on the other two suppliers.
The cost of material purchased from each supplier was as follows:
Page 746
Possum Timber
$120 000
Wombat Plumbing
$150 000
Emu Insulation
S 74 000
Required:
1. Calculate the total cost of ownership for each of the three suppliers, using a format similar to that shown in Exhibit 15.3 0
2. Determine the supplier performance index for each supplier.
3. Discuss the relative performance of each supplier.
4. Do you have any recommendations on supplier selection for the management of Jacaranda Builders?
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