Russell Company uses Beltran Company and Southern Express Inc. to buy the electronic chip used in the manufacturing of its GPS device. Russell Co. has been using these two companies for several years and would like to cut down to only one supplier to purchase the 1.200,000 chips needed per year. In order to determine which supplier is the most cost effective Russell Co. compiled the following data: Activity Testing Warranty work Unit price Units purchased Testing hours Warranty hours Required: Activity Cost 800,000 3,600,000 Beltran Co. $60 865,000 1,200 5,000 Southern Express Inc. $63 335,000 550 1,400 A. Calculate the activity rate for each activity. Round your answer to two decimal places. B. Calculate the cost per chip for each supplier. C. Which supplier should Russell Company choose?

Russell Company uses Beltran Company and Southern Express Inc. to buy the electronic chip used in the manufacturing of its GPS device. Russell Co. has been using these two companies for several years and would like to cut down to only one supplier to purchase the 1.200,000 chips needed per year. In order to determine which supplier is the most cost effective Russell Co. compiled the following data: Activity Testing Warranty work Unit price Units purchased Testing hours Warranty hours Required: Activity Cost 800,000 3,600,000 Beltran Co. $60 865,000 1,200 5,000 Southern Express Inc. $63 335,000 550 1,400 A. Calculate the activity rate for each activity. Round your answer to two decimal places. B. Calculate the cost per chip for each supplier. C. Which supplier should Russell Company choose?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 2CE: Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each...

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