Bundle: Managerial Accounting, 15th + Cengagenowv2, 1 Term Printed Access Card
Bundle: Managerial Accounting, 15th + Cengagenowv2, 1 Term Printed Access Card
15th Edition
ISBN: 9781337955386
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: Cengage Learning
Question
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Chapter 13, Problem 1PB

1.

To determine

Comment on the purchasing policy of Company BM.

2.

To determine

Identify the additional costs involved with the bid of Company IFF beyond price, and the reasons for ignoring them.

3.

To determine

Compute the additional costs per pound for the bid of Company IFF, if the annual cost of money is 8%.

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HD Hogg Motorcycle Company manufactures a variety of motorcycles. Hogg’s purchasingpolicy requires that the purchasing agents place each quarter’s purchasing requirementsout for bid. This is because the Purchasing Department is evaluated solely by its abilityto get the lowest purchase prices. The lowest cost bidder receives the order for the nextquarter (90 days). To make its motorcycles, Hogg requires 4,500 frames per quarter. Hoggreceived two frame bids for the third quarter, as follows:• Famous Frames, Inc.: $301 per frame. Delivery schedule: 50 frames per working day(90 days in the quarter).• Iron Horse Frames Inc.: $300 per frame. Delivery schedule: 4,500 (50 frames × 90 days)frames at the beginning of July to last for three months.Hogg accepted Iron Horse Frames Inc.’s bid because it was the low-cost bid.   Instructions1. Comment on Hogg’s purchasing policy.2. What are the additional (hidden) costs, beyond price, of Iron Horse FramesInc.’s bid? Why weren’t these costs…
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Bundle: Managerial Accounting, 15th + Cengagenowv2, 1 Term Printed Access Card

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