Bowman Company manufactures cooling systems. Bowman 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. Bowman 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 Activity Cost Inspecting components (sampling only) $875,000 Reworking products (due to failed component) 6,920,000 Warranty work (due to failed component) 9,170,000 II. Supplier Data Manzer Inc. Buckner Company Unit purchase price $89 $86 Units purchased 800,000 3,200,000 Sampling hours* 80 3,920 Rework hours 360 5,640 Warranty hours 800 15,200 * 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 Bowman loses $3,504,000 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. Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant: Deluxe Regular Quantity 100,000 800,000 Selling price $900 $750 Unit prime cost $529 $483 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity Name Activity Driver Deluxe Regular Activity Cost Setups Number of setups 300 200 $2,050,000 Machining Machine hours 100,000 300,000 40,000,000 Engineering Engineering hours 50,000 100,000 10,500,000 Packing Packing orders 100,000 400,000 150,000 Required: 1. Calculate the overhead rates for each activity. If required, carry your answers out to the nearest cent. 2. Calculate the per-unit product cost for each product. Round your answers to the nearest whole dollar.
Bowman Company manufactures cooling systems. Bowman 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. Bowman 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
| Activity Cost | |
| Inspecting components (sampling only) | $875,000 |
| Reworking products (due to failed component) | 6,920,000 |
| Warranty work (due to failed component) | 9,170,000 |
II. Supplier Data
| Manzer Inc. | Buckner Company | |
| Unit purchase price | $89 | $86 |
| Units purchased | 800,000 | 3,200,000 |
| Sampling hours* | 80 | 3,920 |
| Rework hours | 360 | 5,640 |
| Warranty hours | 800 | 15,200 |
* 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 Bowman loses $3,504,000 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.
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant:
| Deluxe | Regular | |
| Quantity | 100,000 | 800,000 |
| Selling price | $900 | $750 |
| Unit prime cost | $529 | $483 |
In addition, the following information was provided so that overhead costs could be assigned to each product:
| Activity Name | Activity Driver | Deluxe | Regular | Activity Cost |
| Setups | Number of setups | 300 | 200 | $2,050,000 |
| Machining | Machine hours | 100,000 | 300,000 | 40,000,000 |
| Engineering | Engineering hours | 50,000 | 100,000 | 10,500,000 |
| Packing | Packing orders | 100,000 | 400,000 | 150,000 |
Required:
1. Calculate the overhead rates for each activity. If required, carry your answers out to the nearest cent.
2. Calculate the per-unit product cost for each product. Round your answers to the nearest whole dollar.
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