Q1) You are re-examining a cost proposal that includes the $800,200 direct material estimate. After initial examination of proposal, you note that there are 500 material items, but you also note that 20 high-cost items account for $620,000 of the total. Remaining $180,200 is spread across 480 relatively small purchases.

Q1) You are re-examining a cost proposal that includes the $800,200 direct material estimate. After initial examination of proposal, you note that there are 500 material items, but you also note that 20 high-cost items account for $620,000 of the total. Remaining $180,200 is spread across 480 relatively small purchases.

Q2) Examination of 20 high-cost items (estimated at $620,000) illustrates that all are correctly priced except one item. That item is overpriced by= $20,000. What must be your objective for these 20 items?

Q3) After analyzing a sample of remaining 480 items, you determine that sample is overpriced by 6%. By using this 6% decrement factor, what cost must you evaluate for those items? Keep in mind that average sample item cost is= 106% of what it ought to be.

 

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