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 154,000 $ 16.00 80 25% Dundee 66,000 $ 18 20 10% Total 220,000 $ 16.60 100 22% The Accounting Department recorded $789,250 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

Hnswer The accounting Depostment reorded $789,0850 aj the ast of late deliveries to customers. No of Cartons delivered late - Total purchases (coulonsol milanx percentage of late deliveries of milan + Tolal purchases (castory) of Dundeex percentage of late deliveries of Dundee = 154,000X25% +66,000 X10% = 45,100. Gst of late deliveries perton - Tolol aast of late deliveries Number of cartong delivered late - $789,250 45,100 = $17.5. Dundee Average purchase price (per carton) $16.00 $18.00 Gst of late deliveries per ton $17.5 $17.5 Percentage of late deliveries 25%. 107 Expected cost of late delivery per ten $4,375 |$1.75 Effective price pereston $20.38 $19.75 milan effective price for compenents from the top Companies when late deliveries are milan $20-38 Gnsidered Dundee $19.75 ye Effective Gst of components .fper carton .frem Dundee - $19.75. Average price per Carsten from milan = $ 16.00 Hult will be indifferent between beying from Milan Gmponents and Durdeel Parts if effective price per carton fron, cilan and Dundee is same Hence Expected cost of late delivery per ton from milen have to be = $19.75 - $16.00 = $3.75 Percentage of late delivery from milan have to be = $3.75 $17,5 = 21.4% percentage of late deliveries = 21.4.