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Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in...

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Question

Accounting

Clearsound uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its cell phones: Component 125X and Component 30Y. Consider two activities: testing components and reordering components. After the two components are inserted, testing is done to ensure that the two components in the phones 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:

  1. Activity Costs Caused by Suppliers (testing failures and reordering as a result)

    Activity Costs
    Testing components $1,200,000
    Reordering components 300,000

  2. Supplier Data

    Alpha Electronics La Paz Company
    125X 30Y 125X 30Y
    Unit purchase price $10 $26 $12 $28
    Units purchased 120,000 60,000 15,000 15,000
    Failed tests 1,200 780 10 10
    Number of reorders 60 40 0 0

Required:

  1. Determine the cost of each supplier by using ABC. Round unit costs to two decimal places.

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