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.     Milan Dundee Total Total purchases (cartons)   98,000     42,000     140,000   Average purchase price (per carton) $ 20.00   $ 22   $ 20.60   Number of deliveries   80     20     100   Percentage of late deliveries   25 %   10 %   22 %     The Accounting Department recorded $602,700 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.)

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter11: Strategic Cost Management
Section: Chapter Questions
Problem 22E
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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.

 

  Milan Dundee Total
Total purchases (cartons)   98,000     42,000     140,000  
Average purchase price (per carton) $ 20.00   $ 22   $ 20.60  
Number of deliveries   80     20     100  
Percentage of late deliveries   25 %   10 %   22 %
 

 

The Accounting Department recorded $602,700 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.)

 

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