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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Expert Solution

ekkarill92 answered 1 week ago

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