Jackson, Inc., manufactures motorcycles. Jackson produces all the components necessary for the production of the cycles except for one (a carburetor). This component is purchased from two local suppliers: Harvey Parts and Curtis, Inc. Harvey sells the component for $67 per unit, while Curtis sells the same component for $61. Because of the lower price, Jackson purchases 75 percent of its components from Curtis. Jackson purchases the remaining 25 percent from Harvey to ensure an alternative source. The total annual demand is 148,000 carburetors.

Harveys sales manager is pushing Jackson to purchase more of its units, arguing that its component is of much higher quality and so should prove to be less costly than Curtiss lower-quality component. Harvey has sufficient capacity to supply all the carburetors needed and is asking for a long-term contract. With a five-year contract for 111,000 or more units, Harvey will sell the component for $63 per unit with a contractual provision for an annual product-specific inflationary adjustment. Jacksons purchasing manager is intrigued by the offer and wonders if the higher-quality carburetor actually does cost less than the lower-quality Curtis carburetor. To help assess the cost effect of the two products, the following data were collected for quality-related activities and suppliers:

I. Activity data:
	Activity	Cost
	Inspecting components (sampling only)	$	198,000
	Expediting work (due to late delivery)		151,900
	Reworking products (due to failed component)		957,940
	Warranty work (due to failed component)		1,751,820

II. Supplier data:
		Harvey	Curtis
	Unit purchase price	$67	$61
	Units purchased	37,000	111,000
	Expediting orders	30	280
	Sampling hours*	100	4,400
	Rework hours	260	4,280
	Warranty hours	330	5,690

* The Quality Control Department indicates that sampling inspection for the Harvey component has been reduced because the reject rate is so low.

Required:

1. Calculate the cost per component for each supplier, taking into consideration the costs of the quality-related activities and using the current prices and sales volume. If required, round your unit cost answers to the nearest cent.

	Harvey	Curtis
Purchase cost	$	$
Inspecting components
Expediting work
Reworking products
Warranty work
Total supplier cost	$	$
Units supplied
Unit cost	$	$

Given this information, what do you think the purchasing manager ought to do?

- Select your answer -Accept Harvey's contractual offerReject Harvey's contractual offer information given is insufficient to answerItem 17

2. The Quality Control Department estimates that the company loses $3,431,400 in sales per year because of the reputation effect of defective units attributable to failed components. Suppose that you had to assign the cost of lost sales to each supplier using one of the drivers already listed. Which would you choose? - Select your answer -Expediting ordersRework hoursSampling hoursUnit purchase priceUnits purchasedWarranty hoursItem 18

Using this driver, calculate the change in the unit cost of the Curtis carburetor attributable to lost sales. If required, round your answer to the nearest cent. $ per unit