Reference no: EM132743524
Russell Company uses Beltran Company and Southern Express Inc. to buy the electronic chip used in the manufacturing of its GPS device. Russell Co. has been using these two companies for several years and would like to cut down to only one supplier to purchase the 1,200,000 chips needed per year.
In order to determine which supplier is the most cost-effective, Russell Co. compiled the following data:
Activity Activity Cost
Testing $800,000
Warranty work $3,600,000
Beltran Co. Southern Express Inc.
Unit purchase price $60 $63
Units purchased 865,000 335,000
Testing hours 1,200 550
Warranty hours 5,000 1,400
If required, round your answers to the nearest cent. When required, use rounded amounts in subsequent computations.
Problem 1: Calculate the activity rate for each activity.
Testing Warranty
Problem 2: Calculate the cost per chip for each supplier.
Beltran Co.
Southern Express Inc.
Problem 3: Which supplier should Russell Company choose?
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