Exercise 5-4 (from Text Problem 15-33) Supplier costs analysis; supplier performance measures; supplier selection - builder Wattle Tree 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 consumes by suppliers, identified activity drivers, and estimated the cost per unit of activity driver for last year: Activity Cost per unit of activtity driver Downtime due to poor quality material $200 per unit reworked Order material $250 per order Receive material $180 per delivery Inspect order 5300 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 number of activities: Wallace Gromit Activity Lumber Supplies Sean Insulation Units reworked 10 0 3 Order material 40 48 30 Receive order 40 38 Inspect order 40 60 38 Return material to supplier 5 4 15 Pay supplier 12 48 12 Dispute invoiced amount 2 0 13 In addition, a supplier relationship manager (salary $90,000) was employed. It is estimated that 60% of his time was spent serving Gromit Supplies, and 40% for the other two suppliers. The cost of material purchased from each supplier was as follows: Wallace Lumber $120,000 Gromit supplies $150,000 Sean insulation $74,000 Required: 1. Calculate the total cost of ownership for each of the suppliers, (use format shown by lecturer) 2. Determine the supplier performance index for each supplier; B. Discuss the relative performance of each supplier; 4. Do you have any recommendations on supplier selection for the management of Wattletree Builders