Webb Computers uses Alpha Electronics and La Paz 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)

Activity Costs ($)

Testing components .....600,000

Reordering components .....150,000

II. Supplier Data

Required:
Determine the cost of each supplier by usingABC.

Alpha Electronics La Paz Company 30Y $28 7,500 125X 125X $12 7,500 30Y Unit purchase price Units purchased Failed tests Number of reorders $10 60,000 600 30 $26 30,000 390 20