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 89 percent. That is, 89 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
Required:
Chopin Yards
1,700
$\ 124.00$
3.0
Joe Company
1,100
$\ 122.00$
8.0
Total
2,800
$\ 123.21$
5.0
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.
Effective Cost
per Ton
Chopin Yards
Joe Company
