Watko Entertainment Systems (WES) buys audio and video components for assembling home entertainment systems from two suppliers, Bacon Electronics and Hessel Audio and Video. The components are delivered in cartons. If the cartons are delivered late, the installation for the customer is delayed. Delayed installations lead to contractual penalties that call for WES 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: Bacon 5,000 $ 182 40 Total purchases (cartons) Average purchase price (per carton) Number of deliveries Percentage of cartons delivered late. 30% Bacon Hessel Hessel 3,000 $198 20 15% The Accounting Department recorded $255,450 as the cost of late deliveries to customers. Effective Cost Per Carton Total 8,000 $ 188 60 25% Exercise 10-38 (Algo) Activity-Based Costing of Suppliers (LO 10-3, 4) 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. Also assume that the number of components is the same for all deliveries from either company. What is the effective price for cartons from the two companies when late deliveries are considered? Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Watko Entertainment Systems (WES) buys audio and video components for assembling home entertainment systems from two suppliers, Bacon Electronics and Hessel Audio and Video. The components are delivered in cartons. If the cartons are delivered late, the installation for the customer is delayed. Delayed installations lead to contractual penalties that call for WES 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: Bacon 5,000 $ 182 40 Total purchases (cartons) Average purchase price (per carton) Number of deliveries Percentage of cartons delivered late. 30% Bacon Hessel Hessel 3,000 $198 20 15% The Accounting Department recorded $255,450 as the cost of late deliveries to customers. Effective Cost Per Carton Total 8,000 $ 188 60 25% Exercise 10-38 (Algo) Activity-Based Costing of Suppliers (LO 10-3, 4) 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. Also assume that the number of components is the same for all deliveries from either company. What is the effective price for cartons from the two companies when late deliveries are considered? Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Watko Entertainment Systems (WES) buys audio and video components for assembling home entertainment systems from
two suppliers, Bacon Electronics and Hessel Audio and Video. The components are delivered in cartons. If the cartons are
delivered late, the installation for the customer is delayed. Delayed installations lead to contractual penalties that call for
WES 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:
Bacon
5,000
$ 182
40
Total purchases (cartons)
Average purchase price (per carton)
Number of deliveries
Percentage of cartons delivered late.
30%
Bacon
Hessel
Hessel
3,000
$198
20
15%
The Accounting Department recorded $255,450 as the cost of late deliveries to customers.
Effective Cost
Per Carton
Total
8,000
$ 188
60
25%
Exercise 10-38 (Algo) Activity-Based Costing of Suppliers (LO 10-3, 4)
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. Also assume that the number of components is the same for all deliveries from either company. What is the effective price for
cartons from the two companies when late deliveries are considered?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
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