32. CSO: 1A2e LOS: 1A2i
Denton Inc. manufactures industrial machinery and requires 100,000 switches per year in
its assembly process. When switches are received from a vendor they are installed in the
specific machine and tested. If the switches fail, they are scrapped and the associated
labor cost of $25 is considered lost productivity. Denton purchases “off the shelf”
switches as opposed to custom-made switches and experiences quality problems with
some vendors’ products. A decision must be made as to which vendor to buy from
during the next year based on the following information.
Percentage expected
Vendor Price per switch to pass the test
P $35 90%
Q 37 94%
R 39 97%
S 40 99%
Which vendor should Denton’s controller recommend to management?
a. Vendor P.
b. Vendor Q.
c. Vendor R.
d. Vendor S.
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