Polar Bear Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates in the two companies, 10% of motherboards purchased from Alpha will be inspected and 30% of motherboards purchased from Beta will be inspected. The following data refer to costs associated with Alpha and Beta: Number of orders per year 90. 90 Annual motherboards demanded 19,000 19,000 Price per motherboard $96 $90 Ordering cost per order $10 $11 Inspection cost per unit $5 $5 Average inventory level 200 units 200 units Expected number of stockouts 200 600 Stockout cost (cost of rush order) per stockout $3 $7 Units returned by customers for replacing motherboards 90 900 Cost of replacing each motherboard $23 $23 Required annual return on investment 10% 10% Other carrying cost per unit per year $2.30 $2.30 Requirement 1. What is the relevant cost of purchasing from Alpha and Beta? Calculate the relevant cost of purchasing from Alpha and Beta. Alpha Beta Purchase costs 1824000 1710000 Ordering costs 900 990 Inspection costs Required annual return on investment Stockout costs Return costs Other carrying costs Total cost
Polar Bear Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates in the two companies, 10% of motherboards purchased from Alpha will be inspected and 30% of motherboards purchased from Beta will be inspected. The following data refer to costs associated with Alpha and Beta: Number of orders per year 90. 90 Annual motherboards demanded 19,000 19,000 Price per motherboard $96 $90 Ordering cost per order $10 $11 Inspection cost per unit $5 $5 Average inventory level 200 units 200 units Expected number of stockouts 200 600 Stockout cost (cost of rush order) per stockout $3 $7 Units returned by customers for replacing motherboards 90 900 Cost of replacing each motherboard $23 $23 Required annual return on investment 10% 10% Other carrying cost per unit per year $2.30 $2.30 Requirement 1. What is the relevant cost of purchasing from Alpha and Beta? Calculate the relevant cost of purchasing from Alpha and Beta. Alpha Beta Purchase costs 1824000 1710000 Ordering costs 900 990 Inspection costs Required annual return on investment Stockout costs Return costs Other carrying costs Total cost
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Polar Bear
Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use:
Alpha
or
Beta.
Due to differences in the product failure rates in the two companies,
10%
of motherboards purchased from
Alpha
will be inspected and
30%
of motherboards purchased from
Beta
will be inspected. The following data refer to costs associated with
Alpha
and
Beta:
Number of orders per year
90. 90
Annual motherboards demanded
19,000 19,000
Price per motherboard
$96 $90
Ordering cost per order
$10 $11
Inspection cost per unit
$5 $5
Average inventory level
200 units 200 units
Expected number of stockouts
200 600
Stockout cost (cost of rush order) per stockout
$3 $7
Units returned by customers for replacing motherboards
90 900
Cost of replacing each motherboard
$23 $23
Required annual return on investment
10% 10%
Other carrying cost per unit per year
$2.30 $2.30
Requirement 1. What is the relevant cost of purchasing from
Alpha
and
Beta?
Calculate the relevant cost of purchasing from
Alpha
and
Beta.
|
|
Alpha
|
Beta
|
|---|---|---|
|
Purchase costs
|
1824000
|
1710000
|
|
Ordering costs
|
900
|
990
|
|
Inspection costs
|
|
|
|
Required annual return on investment
|
|
|
|
Stockout costs
|
|
|
|
Return costs
|
|
|
|
Other carrying costs
|
|
|
|
Total cost
|
|
|
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education