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 \$60 \$145 \$57 \$142 Units purchased 15,000 15,000 35,000 35,000 Insufficient units 900 900 3,000 3,000 Returned units 425 425 1,000 1,000

Required:

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

 Adverse buying rate \$fill in the blank 1 per adverse purchase Supplier return rate \$fill in the blank 2 per return

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 \$fill in the blank 3 \$fill in the blank 4 WS \$fill in the blank 5 \$fill in the blank 6

 1) Activity rate Adverse buying     = Total Activity Costs / Total Insufficient units     = \$ 546,000 / ( 900 +900 + 3,000 + 3,000 )     =   \$ 546,000 / 7,800 \$ 70 per adverse purchase Supplier return rate      = Total Activity Costs / Total Returned units     = \$ 74,100 / ( 425 + 425 + 1,000 + 1,000 )     =   \$ 74,100 / 2,850 \$ 26 per return
 Jones Glass Claro Glass Side \$ 64.94 \$ 63.74 WS \$ 149.94 \$ 148.74
 Jones Glass Jones Glass Claro Glass Claro Glass Side WS Side WS Adverse Purchases @ \$ 70 \$ 63,000 ( 900 x \$ 70) \$ 63,000 ( 900 x \$ 70) \$ 210,000 ( 3,000 x \$ 70) \$ 210,000 ( 3,000 x \$ 70) Total Returns @ 26 \$ 11,050 ( 425 x \$ 26) \$ 11,050 ( 425 x \$ 26) \$ 26,000 ( 1,000 x \$ 26 ) \$ 26,000 ( 1,000 x \$ 26 ) Total Cost \$ 74,050 \$ 74,050 \$ 236,000 \$ 236,000 / No. of Units purchased 15,000 15,000 35,000 35,000 Unit Cost \$ 4.94 \$ 4.94 \$ 6.74 \$ 6.74 Unit purchase price \$ 60 \$ 145 \$ 57 \$ 142 Total unit purchasing cost \$ 64.94 \$ 149.94 \$ 63.74 \$ 148.74

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