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In: Accounting

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

Blackburn Inc. uses Otavalo Manufacturing and Piura Company to buy two precision machined parts used in the manufacture of its permanent-magnet motors: Part #625 and Part #827. Consider two activities: testing parts and reordering parts. After the two parts are inserted, testing is done to ensure that the two parts work as intended. Reordering occurs because one or both of the parts have failed the test and it is necessary to replenish part 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 parts $4,500,000
Reordering parts 1,125,000

II. Supplier Data

Otavalo Manufacturing Piura Company
Part #625 Part #827 Part #625 Part #827
Unit purchase price $30 $78 $36 $84
Units purchased 450,000 225,000 56,250 56,250
Failed tests 4,500 2,925 39 36
Number of reorders 225 150 0 0

Required:

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

Otavalo Manufacturing Piura Company
Part #625 $ $
Part #827 $ $

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ekkarill92 answered 6 months ago
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