What cost avoidance would report

Assignment Help Cost Accounting

Reference no: EM132750871

One of your MRO suppliers has approached you with solid evidence that
its costs have risen, and market prices for MRO have also risen. You investigate this and find out that it is true. For safety supplies, the costs have risen on average 5%. The supplier wants a 5% price increase.

Problem a. Assume that you can negotiate with the supplier so that it only raises prices by 3%. If you would have spent USD 1 million with them before the price increase, what cost avoidance would you report? What cost reduction would you report?

Reference no: EM132750871

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