Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor, Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70 percent of its components from Bello, because of the lower price. The total annual demand is 75,000 units.
I. Activity Data
Activity Cost
Inspecting components (sampling only) $190,000
Reworking products (due to failed component) $2,254,000
Warranty work (due to failed component) $1,723,000
II. Supplier Data
Traynor, Inc. Bello Company
Units Purchase Price $10.00 $8.95
Units Purchased 22,500 52,500
Sampling Hours 50 2,450
Rework Hours 135 3,625
Warranty hours 475 6,000
A. Calculate the activity rate for inspecting components based on sampling hours.
B. Calculate the activity rate for reworking products based on rework hours.
C. Calculate the activity rate for warranty work based on warranty hours.
The answers are below I just need to understand the steps to getting the answers so please show your work
- The answers to question A is $76 per-hour
- The answer to Question B is $559 per-hour
- The answer to Question C is $266 per-hour