Activity-Based Supplier Costing Webb Computers uses Alpha Electronics and Laval

Question

Activity-Based Supplier Costing Webb Computers uses Alpha Electronics and Laval Company to buy two electronic components used in the manufacture of its computers: component 125X and component 30Y Consider two activities: testing and reordering components. After the two components are inserted, testing is done to ensure that the two components in the computer 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) Costs (S) 600,000 150,000 Activity Testing components Reordering components II. Supplier Data AIpha Electronics Laval Company 125X 125X 30Y S12 7,500 $28 7,500 Unit purchase price Units purchased Failed tests Number of reorders $10 60,000 600 30 S26 30,000 390 20 Required: Determine the true unit cost from each supplier by using ABC. Round unit costs to two decimal places. Alpha Electronics Laval Company 125X unit cost 30Y unit cost

Explanation / Answer

Determine unit cost :

Alpha electronics Laval company 125X 30Y 125X 30Y Purchase cost 600000 780000 90000 210000 Testing components 360000 234000 3000 3000 Recording components 90000 60000 0 0 Total cost 1050000 1074000 93000 213000 Unit 60000 30000 7500 7500 Unit cost 17.50 35.80 12.40 28.40

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