Seabrook Company manufactures heating systems. Seabrook produces all the parts necessary for its product except for one
Question:
To help assess the cost effect of the two components, the following data were collected for supplier-related activities and suppliers:
I. Activity Data
Activity Cost ($)
Inspecting components (sampling only)..................240,000
Reworking products (due to failed component)......3,042,000
Warranty work (due to failed component)............4,800,000
II. Supplier Data
Required:
1. Calculate the cost per component for each supplier, taking into consideration the costs of the supplier-related activities and using the current prices and sales volume. Round the unit cost to two decimal places.
2. Suppose that Seabrook loses $2,000,000 in sales per year because of the reputation effect of defective units attributable to failed components. Using warranty hours, assign the cost of lost sales to each supplier. By how much would this change the cost of each supplier's component?
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Related Book For
Cornerstones of Managerial Accounting
ISBN: 978-0176530884
2nd Canadian edition
Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman
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