Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen

Exercise 40

Standard Company has two suppliers: Day and Larsen. The cost of warranty work due to defective components is $3,000,000. The total units repaired under warranty average 150,000, of which 135,000 have components from Day and 15,000 have components from Larsen. Select the item below that represents a true statement. a. Components purchased from Larsen cost $300,000 more than their purchase price.
B) Components purchased from Larsen cost $2,700,000 more than their purchase price.
C) Components from Larsen appear to be of lower quality.
D) Components from Day cost $300,000 less than their purchase price.