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 1,900 780 10 10 Number of reorders 60 40 0 0 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: $fill in the blank 1 $fill in the blank 2 $fill in the blank 3 $fill in the blank 4

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter5: Activity-based Costing And Management

Section: Chapter Questions

Problem 59P: Activity-Based Supplier Costing Levy Inc. manufactures tractors for agricultural usage. Levy...

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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			77,800		15,000	15,000
Failed tests	1,900			780		10	10
Number of reorders	60			40		0	0

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:	$fill in the blank 1	$fill in the blank 2		$fill in the blank 3	$fill in the blank 4

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