Question

Required information [The following information applies to the questions displayed below.) Hult Games buys electronic components for manufacturing from two suppliers, Milan Components and Dundee Parts. If the components are delivered late, the shipment to the customer is delayed. Delayed shipments lead to contractual penalties that call for Hult to reimburse a portion of the purchase price to the customer. During the past quarter, the purchasing and delivery data for the two suppliers showed the following. Total purchases (cartons) Average purchase price (per carton) Number of deliveries Percentage of late deliveries Milan 105,000 $ 25.00 80 25% Dundee 45,000 $ 27 20 108 Total 150,000 $ 25.60 100 228 The Accounting Department recorded $430,500 as the cost of late deliveries to customers. Required: Assume that the average quality, measured by the percentage of late deliveries, and prices from the two companies will continue as in the past. What is the effective price for components from the two companies when late deliveries are considered? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Effective Cost Per Carton Milan Dundee

Answer 1

Coputation of Effective cost per carton
	Milan	Dundee
Average purchase Price/ n(a)	$25.00	$27.00
Additional cost of Late delivery per n (b)	$14.00	$14.00
Probaility of late delivery ( c)	25%	10%
Expected Cost of Late Delivery (d=bXc)	$3.50	$1.40
Effective Cost per carton (a+d)	$28.50	$28.40

Working Note:-
Computan of cost of late delivery per n
No n delivered (105000*25%+45000*10%) (a)	30750
Cost of late deliveries (b)	$430,500.00
Cost of Late delivery per nn (b/a)	$14.00