Roscoe Construction Company (RCC) is a company specializing in building roads and highways. As a part of its business, it receives supplies of aggregate from two suppliers: Toorak Gravel (TG) and Kilda Corporation (KC). RCC purchasing has expressed a preference for KC based on price, but occasionally has to order from TG when KC cannot fill the order. RCC has recently had problems with the quality and the timeliness of deliveries. When a supplier delivers a load to RCC, it goes through an initial inspection to assure it meets specification. If the load fails the initial inspection, it goes through a secondary inspection to determine the exact issue. Almost always, the issue can be resolved and the load can be used. The initial inspection costs $2,496 per load. A secondary inspection, which is more thorough, costs $6,275 per load. If a delivery is delayed, RCC has to hire temporary workers or pay overtime to some employees. The average cost of a delayed load is $3,275. The following are summary statistics from last year's purchases from the two suppliers. Toorak Gravel Kilda Corp. Number of loads. Average tons per load 100 10,000 400 5,000 Average price per ton $ 6.00 Number of initial inspections passed Number of delayed deliveries 94 10 $ 5.90 300 80 Required: Calculate the effective cost of a ton of aggregate from the two suppliers, assuming that last year's experience is representative. (Round "Average price paid per ton" & "Average effective price per ton" answers to 2 decimal places.) Answer is complete but not entirely correct. Item Loads purchased Toorak Gravel Kilda Corporation 100 400 Average tons per load Total tons purchased Loads passing initial inspection 10,000 5,000 1,000,000 2,000,000 94 300 Loads delayed 10 80 Average price paid per ton $ 6.00 $ 5.90 Total purchase price $ 6,000,000 Initial inspection costs Secondary inspection costs Delay costs Total costs $240,800 $ 37,200 $ 32,000 $ 11,800,000 $ 963,200 $620,000 $256,000 × $ 6,310,000 $ 13,639,200 Average effective price per ton $ 6.31 $ 6.82x

Roscoe Construction Company (RCC) is a company specializing in building roads and highways. As a part of its business, it receives supplies of aggregate from two suppliers: Toorak Gravel (TG) and Kilda Corporation (KC). RCC purchasing has expressed a preference for KC based on price, but occasionally has to order from TG when KC cannot fill the order. RCC has recently had problems with the quality and the timeliness of deliveries. When a supplier delivers a load to RCC, it goes through an initial inspection to assure it meets specification. If the load fails the initial inspection, it goes through a secondary inspection to determine the exact issue. Almost always, the issue can be resolved and the load can be used. The initial inspection costs $2,496 per load. A secondary inspection, which is more thorough, costs $6,275 per load. If a delivery is delayed, RCC has to hire temporary workers or pay overtime to some employees. The average cost of a delayed load is $3,275. The following are summary statistics from last year's purchases from the two suppliers. Toorak Gravel Kilda Corp. Number of loads. Average tons per load 100 10,000 400 5,000 Average price per ton $ 6.00 Number of initial inspections passed Number of delayed deliveries 94 10 $ 5.90 300 80 Required: Calculate the effective cost of a ton of aggregate from the two suppliers, assuming that last year's experience is representative. (Round "Average price paid per ton" & "Average effective price per ton" answers to 2 decimal places.) Answer is complete but not entirely correct. Item Loads purchased Toorak Gravel Kilda Corporation 100 400 Average tons per load Total tons purchased Loads passing initial inspection 10,000 5,000 1,000,000 2,000,000 94 300 Loads delayed 10 80 Average price paid per ton $ 6.00 $ 5.90 Total purchase price $ 6,000,000 Initial inspection costs Secondary inspection costs Delay costs Total costs $240,800 $ 37,200 $ 32,000 $ 11,800,000 $ 963,200 $620,000 $256,000 × $ 6,310,000 $ 13,639,200 Average effective price per ton $ 6.31 $ 6.82x

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 38P

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