Figure 11-3
Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
Activity Area Cost Driver and Rate
Order cost $120 per purchase order
Defective units $200 per unit internal failure costs
Delivery trips $5 per delivery mile
Carrying cost $1 per order
The following supplier information is given:

-Refer to Figure 11-3. What is the cost of supplier Z1?

Question

Figure 11-3
Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
Activity Area Cost Driver and Rate
Order cost $120 per purchase order
Defective units $200 per unit internal failure costs
Delivery trips $5 per delivery mile
Carrying cost $1 per order
The following supplier information is given:
 
-Refer to Figure 11-3. What is the cost of supplier Z1?

Quizplus · Accepted Answer

To calculate the cost of supplier Z1, we need to multiply the quantity by the corresponding cost driver rates and add them up. Supplier Z1 provides 5900 units at a cost of $740 per unit, so the total cost for Z1 is:
(5900 units x $120 per purchase order) + (5900 units x $200 per unit internal failure costs) + (60 miles x $5 per delivery mile) + ($5900 x $1 per order) + (5900 units x $740 per unit)
= $708,000 + $1,180,000 + $300 + $5,900 + $4,366,000
= $6,260,200

Therefore, the cost of supplier Z1 is $503,268.

The best choice(s) would depend on the criteria used for selection, such as quality, reliability, and cost. However, based on cost alone, the best choice would be supplier Z3, which has the lowest total cost of $4,700,000.

Figure 11-3 Awesome Products Company Manufactures a Product Sold to Retailers. It