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Kinnear Plastics manufactures various components for the aircraft and marine industry. Kinnear buys plastic from two vendors: Tappan Corporation and Hill Enterprises. Kinnear chooses the vendor based on price. Once the plastic is received, it is inspected to ensure that it is suitable for production. Plastic that is deemed unsuitable is disposed of. The controller at Kinnear collected the following information on purchases for the past year: Tappan Hill Total purchases (tons) 4,500 7,500 Plastic discarded 135 375 The purchasing manager has just received bids on an order for 170 tons of plastic from both Tappan and Hill. Tappan bid $1,358 and Hill bid $1,349 per ton. Required: 1-a. Assume that the average quality, measured by the amounts discarded from the two companies, will continue as in the past. What is the effective cost per ton for both Tappan and Hill

Respuesta :

akindelemf

Answer:

Tappan    is $1400      

Hill             is  $1420

Step-by-step explanation:

Particulars                                      Tappan             Hill

Tons purchased                             4500            7500

Tons discarded                                135                 375

% plastic discarded                             3%               5%

% plastic accepted for                           97%             95%

Quoted price                                             1358           1349

% accepted for                                            97%              95%

Effective cost per ton

= Quoted price / % accepted for

                                                                     $ 1400           $1420

Effective cost per ton

Tappan          Hill

$1400              $1420

With the effective cost estimate, the purchasing manager can provide a more accurate budget.

  • The effective cost per ton for Tappan is $1,400
  • The effective cost per ton for Hill is $1,420

Reasons:

The effective cost of a good is the worth of the goods that are to be used;

The purchases for the last year are;

[tex]\begin{tabular}{c|c|c|}&Tappan & Hill\\Total purchases&4,500&7,500\\Plastic discarded&135&375\end{array}\right][/tex]

  • [tex]\displaystyle \mathbf{Percentage} \ of \ discarded} \ for \ Tappan = \frac{135}{4,500} \times 100 = 3\%[/tex]

Therefore;

Usable plastic supplied by Tappan = 100% - 3% = 97%

Percentage of the plastics supplied by Tappan that is used = 97%

  • [tex]\displaystyle Percentage \ discarded \ for \ Hill = \mathbf{\frac{375}{7,500} \times 100} = 5\%[/tex]

Used plastic supplied by Hill = 100% - 5% = 95%

Cost per ton in the Tappan bid = $1,358

Therefore;

1,358 = 0.97 × 1 ton

[tex]\displaystyle 1 \, ton \, of \ to \ be \ used \, plastic \, from \ Tappan \, cost = \frac{1,358}{0.97} = 1,400[/tex]

  • The effective cost per ton of plastic from Tappan = $1,400

Similarly

Cost per ton in the bid by Hill = $1,349

[tex]\displaystyle 1 \, ton \, of \, usable \, plastic \, from \, Hill \ costs = \frac{1,349}{0.95} = 1,420[/tex]

  • The effective cost per ton of plastic from Hill = $1,420

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