Question: ABC inc. manufactures a complex product and uses outsource provider for one of the required components. ABS purchased these components from DEF for 425 each.

ABC inc. manufactures a complex product and uses outsource provider for one of the required components. ABS purchased these components from DEF for 425 each. The effectiveness of the system is dependent upon the quality of all components. In the past 5 years, an average of 12% of the component purchased from the supplier have not met ABC's quality requirements and has resulted in failures in meeting production schedules. In addition, ABC has incurred additional costs to replace the defective units because the rejection rate of the units is within the range agreed upon in the contract. They require 20,000 units this year.

What is the total cost to purchase these units from the supplier? $

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