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Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in...

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Accounting

Blackburn Inc. uses Otavalo Manufacturing and Piura Company tobuy two precision machined parts used in the manufacture of itspermanent-magnet motors: Part #625 and Part #827. Consider twoactivities: testing parts and reordering parts. After the two partsare inserted, testing is done to ensure that the two parts work asintended. Reordering occurs because one or both of the parts havefailed the test and it is necessary to replenish part inventories.Activity cost information and other data needed for suppliercosting are as follows:

I. Activity Costs Caused by Suppliers (testingfailures and reordering as a result)

ActivityCosts    
Testing parts$4,500,000
Reordering parts1,125,000

II. Supplier Data

Otavalo ManufacturingPiura Company
Part #625Part #827Part #625Part #827
Unit purchase price$30$78$36$84
Units purchased450,000225,00056,25056,250
Failed tests4,5002,9253936
Number of reorders22515000

Required:

Determine the cost of each supplier by using ABC. Round unitcosts to two decimal places.

Otavalo ManufacturingPiura Company
Part #625$$
Part #827$$

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