1. Review Question 15.6
Where a unit or product was the cost object, activity-based costing (ABC) tracks expenses to cost
objects based on their resource consumption or use of cost drivers. Buyers can use the same method
to calculate the total cost of ownership for each of its suppliers. The total cost of ownership, which
includes the total of supplier activity expenses as well as the purchase cost, is the sum of all costs
involved with dealing with a certain provider. Supplier is the object cost. To calculate total supplier
activity costs, define the supplier activities and their cost drivers. The amount of activities associated
with each supplier is then costed.
2. Review Question 15.6
Customer profitability can be determined using activity-based costing. Customers can be labeled as
cost objects, and ABC can be used to estimate the cost of doing business with a single customer or a
cluster of customers. Costs depending on customer concern activities that vary by customer or
customer group. The 3 main levels include the following:
1. order level of activities
2. customer activity level
3. market level of activities
3. Problem 15.38 SUPPLIER RELATIONSHIPS
JIT SYSTEM: MANUFACTURER

How can a company avoid the risk of running down the levels of inventory?
Inventory shortages can be a severe issue for JIT companies because there are no buffer stocks, and a
supply interruption can result in production being halted, manufacturing workers being laid off, and
customer orders not being fulfilled. As a result, it may have a significant impact on the company's
profitability and competition. Additionally, the company must only work with suppliers who have
well-established quality standards, can deliver quickly on short notice, and do not have a history of
poor labor relations.
 How can the company keep effective control over payments with suppliers?
Separate purchase orders and invoices are not raised for each delivery from suppliers at Jack's
company. Because the quantity of delivery is so large, the expense of doing so would be prohibitive.
Blanket purchase orders can be extended to cover several months or even years. To cover for a range
of deliveries, monthly invoices can be prepared.