Supplier evaluation and relevant costs of quality and timely deliveries (continuation of 20-34). Hardesty Medical Instruments installed a JIT purchasing system in 2010 and selected Morrison Manufacturing Inc. as its supplier. Herriott Manufacturing Corporation also manufactures XJ-200. It offers to supply all of Hardesty's XJ-200 needs at a price of $11.70 per unit (less than Morrison's price of $12.06) under the same JIT delivery terms that Morrison offers. Hardesty's relevant carrying costs of insurance, material handling, and so on would be $5.28 per unit per year if it purchases from Herriott. Due to the lower quality of Herriott's product, Hardesty anticipates the following negative consequences of purchasing from Herriott: Hardesty would incur inspection costs of $0.096 per unit. Average stockouts of 800 units per year would occur from late deliveries, requiring rush orders at a cost of $3.60 per unit. Customers would likely return 10% of all units sold due to poor quality of the product. Hardesty estimates its additional costs to handle each returned unit are $7.20. REQUIRED Calculate the relevant costs of purchasing (1) from Morrison and (2) from Herriott using the format of Exhibit 20-6 (p. 979). From whom should Hardesty buy XJ-200?

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