Activity-Based Supplier Costing
Noguchi Company manufactures cooling systems. Noguchi produces all the parts necessary for
its product except for one electronic component, which is purchased from two local suppliers:
Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late;
however, Manzer sells the component for $89 per unit, while Buckner sells the same component
for $86. Noguchi purchases 80% of its components from Buckner because of its lower price. The
total annual demand is 4,000,000 components.
To help assess the cost effect of the two components, the following data were collected for
supplier-related activities and suppliers:
I. Activity Data
II. Supplier Data
* Sampling inspection for Manzer's product has been reduced because the reject rate is so low.
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. (Note: Round the
intermediate calculations to the whole number for the following activity rates: "Reworking
products" and "Warranty work". Round the unit cost to two decimal places.)
2a. Suppose that Noguchi loses $3,552,000 in sales per year because it develops a poor
reputation due to defective units attributable to failed components. Using warranty hours, assign
the cost of lost sales to each supplier.
2b. By how much would this change the cost of each supplier's component? Round your
answers to the nearest cent.
unit cost increase
unit cost increaseLine Item DescriptionActivity CostInspecting components (sampling
only)$780,000Reworking products (due to failed component)8,270,000Warranty work (due to
failed component)9,570,000.
Activity-Based Supplier CostingNoguchi Company manufactures coolin.pdf
1. Activity-Based Supplier Costing
Noguchi Company manufactures cooling systems. Noguchi produces all the parts necessary for
its product except for one electronic component, which is purchased from two local suppliers:
Manzer Inc. and Buckner Company. Both suppliers are reliable and seldom deliver late;
however, Manzer sells the component for $89 per unit, while Buckner sells the same component
for $86. Noguchi purchases 80% of its components from Buckner because of its lower price. The
total annual demand is 4,000,000 components.
To help assess the cost effect of the two components, the following data were collected for
supplier-related activities and suppliers:
I. Activity Data
II. Supplier Data
* Sampling inspection for Manzer's product has been reduced because the reject rate is so low.
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. (Note: Round the
intermediate calculations to the whole number for the following activity rates: "Reworking
products" and "Warranty work". Round the unit cost to two decimal places.)
2a. Suppose that Noguchi loses $3,552,000 in sales per year because it develops a poor
reputation due to defective units attributable to failed components. Using warranty hours, assign
the cost of lost sales to each supplier.
2b. By how much would this change the cost of each supplier's component? Round your
answers to the nearest cent.
unit cost increase
unit cost increaseLine Item DescriptionActivity CostInspecting components (sampling
only)$780,000Reworking products (due to failed component)8,270,000Warranty work (due to
failed component)9,570,000
