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Roscoe Construction Company (RCC) is a company specializing in building roads and highways. As a part of its business, it receives supplies of aggregate from two suppliers: Toorak Gravel (TG) and Kilda Corporation (KC). RCC purchasing has expressed a preference for KC based on price, but occasionally has to order from TG when KC cannot fill the order. RCC has recently had problems with the quality and the timeliness of deliveries. When a supplier delivers a load to RCC, it goes through an initial inspection to assure it meets specification. If the load fails the initial inspection, it goes through a secondary inspection to determine the exact issue. Almost always, the issue can be resolved and the load can be used. The initial inspection costs $1,000 per load. A secondary inspection, which is more thorough, costs $5,000 per load. If a delivery is delayed, RCC has to hire temporary workers or pay overtime to some employees. The average cost of a delayed load is $2,000. The following are summary statistics from last year's purchases from the two suppliers. Number of loads Average tons per load Average price per ton Number of initial inspections passed Number of delayed deliveries Toorak Gravel 100 10,000 $ 6.00 94 10 Kilda Corp. 400 5,000 $ 5.90 300 80 Required: Calculate the effective cost of a ton of aggregate from the two suppliers, assuming that last year's experience is representative. Toorak Gravel Kilda Corporation Item Loads purchased Average tons per load Total tons purchased Loads passing initial inspection Loads delayed Average price paid per ton Total purchase price Initial inspection costs Secondary inspection costs Delay costs Total costs Average effective price per ton

Roscoe Construction Company (RCC) is a company specializing in building roads and highways. As a part of its business, it receives supplies of aggregate from two suppliers: Toorak Gravel (TG) and Kilda Corporation (KC). RCC purchasing has expressed a preference for KC based on price, but occasionally has to order from TG when KC cannot fill the order. RCC has recently had problems with the quality and the timeliness of deliveries. When a supplier delivers a load to RCC, it goes through an initial inspection to assure it meets specification. If the load fails the initial inspection, it goes through a secondary inspection to determine the exact issue. Almost always, the issue can be resolved and the load can be used. The initial inspection costs $1,000 per load. A secondary inspection, which is more thorough, costs $5,000 per load. If a delivery is delayed, RCC has to hire temporary workers or pay overtime to some employees. The average cost of a delayed load is $2,000. The following are summary statistics from last year's purchases from the two suppliers. Number of loads Average tons per load Average price per ton Number of initial inspections passed Number of delayed deliveries Toorak Gravel 100 10,000 $ 6.00 94 10 Kilda Corp. 400 5,000 $ 5.90 300 80 Required: Calculate the effective cost of a ton of aggregate from the two suppliers, assuming that last year's experience is representative. Toorak Gravel Kilda Corporation Item Loads purchased Average tons per load Total tons purchased Loads passing initial inspection Loads delayed Average price paid per ton Total purchase price Initial inspection costs Secondary inspection costs Delay costs Total costs Average effective price per ton

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
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Roscoe Construction Company (RCC) is a company specializing in building roads and highways. As a part of its business, it receives supplies of aggregate from two suppliers: Toorak Gravel (TG) and Kilda Corporation (KC). RCC purchasing has expressed a preference for KC based on price, but occasionally has to order from TG when KC cannot fill the order. RCC has recently had problems with the quality and the timeliness of deliveries. When a supplier delivers a load to RCC, it goes through an initial inspection to assure it meets specification. If the load fails the initial inspection, it goes through a secondary inspection to determine the exact issue. Almost always, the issue can be resolved and the load can be used. The initial inspection costs $1,000 per load. A secondary inspection, which is more thorough, costs $5,000 per load. If a delivery is delayed, RCC has to hire temporary workers or pay overtime to some employees. The average cost of a delayed load is $2,000. The following are summary statistics from last year's purchases from the two suppliers. Toorak Gravel 100 10,000 6.00 Kilda Corp. 400 Number of loads Average tons per load Average price per ton Number of initial inspections passed Number of delayed deliveries 5,000 $ 5.90 300 80 2$ 94 10 Required: Calculate the effective cost of a ton of aggregate from the two suppliers, assuming that last year's experience is representative. Toorak Gravel Kilda Item Corporation Loads purchased Average tons per load Total tons purchased Loads passing initial inspection Loads delayed Average price paid per ton Total purchase price Initial inspection costs Secondary inspection costs Delay costs Total costs Average effective price per ton
Transcribed Image Text:Roscoe Construction Company (RCC) is a company specializing in building roads and highways. As a part of its business, it receives supplies of aggregate from two suppliers: Toorak Gravel (TG) and Kilda Corporation (KC). RCC purchasing has expressed a preference for KC based on price, but occasionally has to order from TG when KC cannot fill the order. RCC has recently had problems with the quality and the timeliness of deliveries. When a supplier delivers a load to RCC, it goes through an initial inspection to assure it meets specification. If the load fails the initial inspection, it goes through a secondary inspection to determine the exact issue. Almost always, the issue can be resolved and the load can be used. The initial inspection costs $1,000 per load. A secondary inspection, which is more thorough, costs $5,000 per load. If a delivery is delayed, RCC has to hire temporary workers or pay overtime to some employees. The average cost of a delayed load is $2,000. The following are summary statistics from last year's purchases from the two suppliers. Toorak Gravel 100 10,000 6.00 Kilda Corp. 400 Number of loads Average tons per load Average price per ton Number of initial inspections passed Number of delayed deliveries 5,000 $ 5.90 300 80 2$ 94 10 Required: Calculate the effective cost of a ton of aggregate from the two suppliers, assuming that last year's experience is representative. Toorak Gravel Kilda Item Corporation Loads purchased Average tons per load Total tons purchased Loads passing initial inspection Loads delayed Average price paid per ton Total purchase price Initial inspection costs Secondary inspection costs Delay costs Total costs Average effective price per ton
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