User Account

All Pages

What is the maximum price rcc should offer kc

Assignment Help Cost Accounting
Reference no: EM132633639

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 $2,500 per load. A secondary inspection, which is more thorough, costs $300 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 $3,500.

The following are summary statistics from last year's purchases from the two suppliers.

                                                  Toorak Kilda                          Gravel Corp.

Number of loads                                     100                               400

Average tons per load                            10,000                           5,000

Average price per ton                                 $6.00                           $5.90

Number of initial inspections passed                    94                              300

Number of delayed deliveries                             10                                   80

The sales manager of Kilda Corporation has proposed to the purchasing manager at RCC that KC be given an exclusive contract to supply the aggregate. Assume that the total annual demand remains the same. If it receives the contract, KC will deliver the aggregate in the same average-sized load as it does currently.

Required:

Question a. If KC receives the exclusive contract, assume the load quality and delivery timeliness will remain the same as current experience. What is the maximum price RCC should offer KC for the exclusive contract? (Round your intermediate calculations and final answer to 2 decimal places.)

Question b. Suppose KC guarantees that no deliveries will be delayed or it will repay RCC for the costs associated with the delays. What is the maximum price RCC should offer KC for the exclusive contract? (Round your intermediate calculations and final answer to 2 decimal places.)

a. Maximum Price per ton

b. Maximum Price per ton

Reference no: EM132633639

Questions Cloud

Which criteria is necessary for revenue recognition : What are examples of expense that would not be considered an expenditure and one expenditure that would not be considered expense.
Where in the general fund financial statements would report : Where in the General Fund financial statements would you report Salaries paid to government employees? Purchase of a capital asset?
Record Pippen pre-consolidation journal entries on January : Printer's and underwriting fees in relation to the common stock issued of $5,000, Record Pippen's pre-consolidation journal entries on January 1, 2019
Find lab classroom environment : Describe your experiences as a new comer to the lab classroom environment.
What is the maximum price rcc should offer kc : What is the maximum price RCC should offer KC for the exclusive contract? (Round your intermediate calculations and final answer to 2 decimal places.)
How much interest expense will be recorded : On January, Cheery issued 250 million euros of 10 year convertible notes that pay interest at 5% annually. How much interest expense will be recorded
How are price and quantity variances computed : How are price and quantity variances computed? Why are separate price and quantity variances useful to an organization? Explain in detail.
Compute sales-mix variance and the sales-quantity variance : Compute the sales-mix variance and the sales-quantity variance by type of vacuum cleaner, and in total. (in terms of the contribution margin)
What is the balance of its common stock account : A company has the following accounts and account balances at the end of its first year: What is the balance of its common stock account at the end year

Reviews

Write a Review

Cost Accounting Questions & Answers

  Cost accounting assignment

Evaluate Method of measuring costs associated with production, budgeting process, normal job-order costing system , master budget, cycle time.

  Prepare the journal entries

Prepare the journal entries to record the bond issue and interest expense.

  Advise as to the liability of all the parties

Write a report on given case study and Advise as to the liability of ALL the parties both under common law and the Corporations Law.

  Prepare revenues budget

Prepare Revenues budget and Production budget in units

  Effect of exchange rate changes on cash and cash

Effect of exchange rate changes on cash and cash

  Corporate governance

You are to reflect on how this case of China Sky relates to what the arguments for and against allowing audit firm partners and/or employees to join audit committees.

  Cost-benefit analysis

A cost-benefit analysis of electronic medical records in primary care

  Non-annual interest rates and annuities

Theory of Interest- Non-annual interest rates and annuities

  Job costing in service organizations

How is job costing in service organizations different from job costing in manufacturing environments?

  Accounting for bad debt expense

Accounting for bad debt expense

  Accounting and partnership problems

Accounting and Partnership problems

  Development of relevant cash flows

Development of relevant cash flows - Cost estimating and financial analysis

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd