Question

Kinnear Plastics manufactures various components for the aircraft and marine industry. Kinnear buys plastic from two vendors: Tappan Corporation and Hill Enterprises. Kinnear chooses the vendor based on price. Once the plastic is received, it is inspected to ensure that it is suitable for production. Plastic that is deemed unsuitable is disposed of.

The controller at Kinnear collected the following information on purchases for the past year:

	Tappan	Hill
Total purchases (tons)	6,500	10,500
Plastic discarded	162	525

The purchasing manager has just received bids on an order for 300 tons of plastic from both Tappan and Hill. Tappan bid $1,560 and Hill bid $1,539 per ton.

Required:

a. Assume all else remains the same. What bid by Tappan would make Kinnear indifferent between buying from Tappan or Hill? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Bid?

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.