Question

# Activity-Based Supplier Costing Ventana Company is a car window repair and replacement company operating in the...

Activity-Based Supplier Costing

Ventana Company is a car window repair and replacement company operating in the after-sales market. Ventana’s purchasing manager uses two suppliers (Jones Glass and Claro Glass) for the source of its passenger car windows. Data relating to side windows (Side) and windshields (WS) are given below.

I. Activity costs

* Extra cost of purchasing from local car dealer because of insufficient delivery of supplier.
** Windows returned because they were not ordered or because they were defective.

II. Supplier Data

 Jones Glass Claro Glass Side WS Side WS Unit purchase price \$90 \$145 \$87 \$142 Units purchased 15,000 15,000 35,000 35,000 Insufficient units 900 900 3,300 3,300 Returned units 475 475 2,000 2,000

Required:

1. Calculate the activity rates for assigning costs to suppliers.

2. Calculate the total unit purchasing cost for each component for each supplier. If required, round your answers to the nearest cent.

 Total unit cost Jones Glass Claro Glass Side \$ \$ WS \$ \$

(1) We will first find Total activity incurred

Total insufficient units = 900+900+3300+3300

=8,400

=\$588,000/8400

Total returned units = 475+475+2000+2000

=4,950 per return

Supplier return rate=supplier return cost/total returned units

\$148,500/4950

=\$30 per return

(2) Total unit purchasing cost = Total cost/ number of units

Total costs = purchase cost*units+adveres buying rate *insufficient units+supplier return rate*returned units

 Jones Glass Claro Glass side \$95.15(\$90*15000 units+900*\$70+\$30*475)/15,000 \$95.31(\$87*35,000+3300*\$70+2000*\$30)/35,000 WS \$150.15(\$145*15,000+900*\$70+475*\$30)/15,000 units \$150.31(\$142*35,000+\$70*3300+\$30*2000)/35,000

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