Exercise 10-38 & 10-39 (Algo) (LO 10-3, 4) [The following information applies to the questions displayed below.] 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: Total purchases (cartons) Average purchase price (per carton) Number of deliveries Percentage of cartons delivered late. Bacon 5,000 Hessel Total 3,000 8,000 $ 164 $ 180 40 20 $ 170 60 30% 15% 25% The Accounting Department recorded $237,900 as the cost of late deliveries to customers. Exercise 10-39 (Algo) Activity-Based Costing of Suppliers (LO 10-3, 4) 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. Required: What percentage of late deliveries by Bacon would make WES indifferent between buying from Bacon Electronics and Hessel Audio and Video? Note: Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (i.e., .3212 as 32.12). Indifference point %
Exercise 10-38 & 10-39 (Algo) (LO 10-3, 4) [The following information applies to the questions displayed below.] 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: Total purchases (cartons) Average purchase price (per carton) Number of deliveries Percentage of cartons delivered late. Bacon 5,000 Hessel Total 3,000 8,000 $ 164 $ 180 40 20 $ 170 60 30% 15% 25% The Accounting Department recorded $237,900 as the cost of late deliveries to customers. Exercise 10-39 (Algo) Activity-Based Costing of Suppliers (LO 10-3, 4) 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. Required: What percentage of late deliveries by Bacon would make WES indifferent between buying from Bacon Electronics and Hessel Audio and Video? Note: Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (i.e., .3212 as 32.12). Indifference point %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Exercise 10-38 & 10-39 (Algo) (LO 10-3, 4)
[The following information applies to the questions displayed below.]
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:
Total purchases (cartons)
Average purchase price (per carton)
Number of deliveries
Percentage of cartons delivered late.
Bacon
5,000
Hessel
Total
3,000
8,000
$ 164
$ 180
40
20
$ 170
60
30%
15%
25%
The Accounting Department recorded $237,900 as the cost of late deliveries to customers.
Exercise 10-39 (Algo) Activity-Based Costing of Suppliers (LO 10-3, 4)
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.
Required:
What percentage of late deliveries by Bacon would make WES indifferent between buying from Bacon Electronics and Hessel Audio
and Video?
Note: Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (i.e., .3212 as
32.12).
Indifference point
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F19d5be5f-227e-472c-a585-509658966cb3%2F64d295c9-45e6-40ff-a989-7991cb61b9ef%2Fg9qy6sb_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 10-38 & 10-39 (Algo) (LO 10-3, 4)
[The following information applies to the questions displayed below.]
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:
Total purchases (cartons)
Average purchase price (per carton)
Number of deliveries
Percentage of cartons delivered late.
Bacon
5,000
Hessel
Total
3,000
8,000
$ 164
$ 180
40
20
$ 170
60
30%
15%
25%
The Accounting Department recorded $237,900 as the cost of late deliveries to customers.
Exercise 10-39 (Algo) Activity-Based Costing of Suppliers (LO 10-3, 4)
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.
Required:
What percentage of late deliveries by Bacon would make WES indifferent between buying from Bacon Electronics and Hessel Audio
and Video?
Note: Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (i.e., .3212 as
32.12).
Indifference point
%
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