Required information [The following information applies to the questions displayed below.] Rex Metal Fabricators (RMF) buys scrap metal and produces components for buildings and other structures. The purchase contracts specify an average quality level of 90 percent. That is, 90 percent of the metal must be ready for use without further processing. Metal that is not ready can be treated at extra cost by RMF, and this is more cost-effective than scrapping the metal and purchasing additional amounts. The cost of treating the metal requiring further processing is $80 per ton. RMF uses two suppliers: Chopin Yards and Joe Company. During the past year, the purchasing quality data were as follows: Total purchases (tons) Average purchase price (per ton) Percentage requiring further processing Chopin Yards Joe Company Chopin Yards 1,500 $ 124.00 2.0 Effective Cost per Ton Joe Company 1,000 $ 120.00 7.5 Total Required: Assume that the average quality, measured by the percentage of metal purchases requiring further processing, and prices from the two companies will continue as in the past. What is the effective price for metal from the two companies when quality is considered? Note: Round your answers to 2 decimal places. 2,500 $ 122.40 4.2

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
[The following information applies to the questions displayed below.]
Rex Metal Fabricators (RMF) buys scrap metal and produces components for buildings and other structures. The purchase
contracts specify an average quality level of 90 percent. That is, 90 percent of the metal must be ready for use without
further processing. Metal that is not ready can be treated at extra cost by RMF, and this is more cost-effective than
scrapping the metal and purchasing additional amounts. The cost of treating the metal requiring further processing is $80
per ton.
RMF uses two suppliers: Chopin Yards and Joe Company. During the past year, the purchasing quality data were as
follows:
Total purchases (tons)
Average purchase price (per ton)
Percentage requiring further processing
Chopin Yards
Joe Company
Chopin Yards
1,500
$ 124.00
2.0
Effective Cost
per Ton
Joe Company
1,000
$ 120.00
7.5
Total
Required:
Assume that the average quality, measured by the percentage of metal purchases requiring further processing, and prices from the
two companies will continue as in the past. What is the effective price for metal from the two companies when quality is considered?
Note: Round your answers to 2 decimal places.
2,500
$ 122.40
4.2
Transcribed Image Text:! Required information [The following information applies to the questions displayed below.] Rex Metal Fabricators (RMF) buys scrap metal and produces components for buildings and other structures. The purchase contracts specify an average quality level of 90 percent. That is, 90 percent of the metal must be ready for use without further processing. Metal that is not ready can be treated at extra cost by RMF, and this is more cost-effective than scrapping the metal and purchasing additional amounts. The cost of treating the metal requiring further processing is $80 per ton. RMF uses two suppliers: Chopin Yards and Joe Company. During the past year, the purchasing quality data were as follows: Total purchases (tons) Average purchase price (per ton) Percentage requiring further processing Chopin Yards Joe Company Chopin Yards 1,500 $ 124.00 2.0 Effective Cost per Ton Joe Company 1,000 $ 120.00 7.5 Total Required: Assume that the average quality, measured by the percentage of metal purchases requiring further processing, and prices from the two companies will continue as in the past. What is the effective price for metal from the two companies when quality is considered? Note: Round your answers to 2 decimal places. 2,500 $ 122.40 4.2
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