Question

Hult Games buys electronic components for manufacturing from two suppliers, Milan Components and Dundee Parts. If the components are dellvered late, the shipment to the customer is delayed. Delayed shipments lead to contractual penalties that call for Hult to relmburse a portion of the purchase price to the customer. During the past quarter, the purchasing and delivery data for the two suppiers showed the following MilanDundee Total 40,000 60,000 200oco Total purchases (cartons Average purchase price(per caton Number of delveries Pcroentage of late dellverics 18孚20 18G0 The Accounting Department recorded $635,500 as the cost of late deliveries to customers Required information 0.00 points 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.) Per Carton Mlan Dundee

Answer 1

Computation of Effective Price of a Ton
	Milan	Dundee
Average purchase Price/ Ton(a)	18	20
Additional cost of Late delivery per ton (b)	15.5	15.5
Probability of late delivery ( c)	25%	10%
Expected Cost of Late Delivery (d=bXc)	3.875	1.55
Effective Cost per Ton (a+d)	21.875	21.55

Working Note:-
Computation of cost of late delivery per ton
No ton delivered (140000*25%+60000*10%) (a)	41000
Cost of late deliveries (b)	635500
Cost of Late delivery per Tonn (b/a)	15.5

Dear student kindly let me know, if you are having any doubt and please mark with positive rating.