Figure 7-3.Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70% of its components from Bello, because of the lower price. The total annual demand is 75,000 units.
-Refer to Figure 7-3. Calculate the total cost per component associated with using Bello Company as the supplier.
A) $12.00
B) $8.95
C) $84.26
D) $15.74
E) $86.25

Question

Figure 7-3.Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70% of its components from Bello, because of the lower price. The total annual demand is 75,000 units.  
-Refer to Figure 7-3. Calculate the total cost per component associated with using Bello Company as the supplier.
A) $12.00 
B) $8.95 
C) $84.26 
D) $15.74 
E) $86.25

Quizplus · Accepted Answer

The total cost per component is the sum of the material cost, labor cost, and overhead cost. The material cost is $10.00, the labor cost is $2.00, and the overhead cost is $62.26. Therefore, the total cost per component is $10.00 + $2.00 + $62.26 = $84.26.