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[ The following information applies to the questions displayed below. ] Rex Metal Fabricators ( RMF ) buys scrap metal and produces components for buildings
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 percent. That is 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 costeffective than scrapping the metal and purchasing additional amounts. The cost of treating the metal requiring further processing is $ per ton.
RMF uses two suppliers: Chopin Yards and Joe Company. During the past year, the purchasing quality data were as follows:
Chopin Yards Joe Company Total
Total purchases tons
Average purchase price per ton $ $ $
Percentage requiring further processing
Required:
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?
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