Your company assembles five different models of a motor scooter that is sold in

Question

Your company assembles five different models of a motor scooter that is sold in specialty stores in the United States. The company uses the same engine for all five models. You have been given the assignment of choosing a supplier for these engines for the coming year. Due to the size of your warehouse and other administrative restrictions, you must order the engines in lot sizes of 850 units. Because of the unique characteristics of the engine, special tooling is needed during the manufacturing process for which you agree to reimburse the supplier. Your assistant has obtained quotes from two reliable engine suppliers and you need to decide which to use. The following data have been collected:

   

Note: Assume that half of lot size is in inventory on average (850/2 = 425 units).

Two qualified suppliers have submitted the following quotations:

Your assistant has obtained the following freight rates from your carrier:

Note: Per ton-mile = 2,000 lbs. per mile.

a-1. Calculate the total cost for each supplier. (Round your answers to the nearest whole number.)

a-2. Which supplier would you select?

    

b-1. If you could move the lot size up to ship in truckload quantities, calculate the total cost for each supplier. (Do not round intermediate calculations. Round "Required lot size for truckload" andfinalanswers to the nearest whole number.)

HINT: Use (full) truckload cost rates and the lowest (feasible) unit cost for all calculations. For example, if there are 8.3 orders per year, don’t split the 8.3 orders into 8 full truckloads and 0.3 less-than-truckloads - use the full truckload rate for all 8.3 orders. For annual purchase cost, don’t use two different unit costs for the 8 complete orders and the 0.3 partial orders – use the lowest (feasible) unit cost for all 8.3 purchase orders based on the lot size needed for a full truckload.

b-2. Would your supplier selection change?

    

No

Requirements (annual forecast) 10,200 units Weight per engine 20 pounds Order processing cost $ 160 per order Inventory carry cost 20 percent of the average value of inventory per year Requirements (annual forecast) Weight per engine Order processing Inventory carry cost 10,200 units 20 pounds cost S 160 per order 20 percent of the average value of inventory per year Nofe: Assume that half of lot size is in inventory on average (85012 425 units). Two qualified suppliers have submitted the following quotations: SUPPLIER 1 UNIT PRICE $ 702 SUPPLIER 2 UNIT PRICE S 700 ORDER QUANTITY 1 to 1,499 units/order 1,500 to 2,999 units/order 3,000units order Tooling costs Distance 698 696 700 695 $26,820 $23,400 115 miles 00 miles Your assistant has obtained the following freight rates from your carrier. Truckload (43,000 lbs. each load): $0.80 per ton-mile $1.20 per ton-mile Note: Per ton-mile = 2,000 lbs. per mile a-1. Calculate the total cost for each supplier. (Round your answers to the nearest whole number.) Supplier Supplier 2 Total cost a-2. Which supplier would you select? Supplier 1 Supplier2 b-1. If you could move the lot size up to ship in truckload quantities, calculate the total cost for each supplier. (Do not round intermediate calculations. Round "Required lot size for truckload" and final answers to the nearest whole number. HINT: Use (full) truckload cost rates and the lowest (feasible) unit cost for all calculations. For example, if there are 8.3 orders per year, don't split the 8.3 orders into 8 full truckloads and 0.3 less-than-truckloads- use the full truckload rate for all 8.3 orders. For annual purchase cost, don't use two different unit costs for the 8 complete orders and the 0.3 partial orders- use the lowest (feasible) unit cost for all 8.3 purchase orders based on the lot size needed for a full truckload. Supplier 1 Supplier 2 Total cost

Explanation / Answer

Minimum truck load = 43000 lbs each load

Answer 1)

Answer A 2) Supplier 2

Answer b)

1075

B 2) Yes

For order of lot 850 (freight cost) Supplier 1 Supplier 2 Per lot weight (lbs) 17000 less than truck Cost 1173 1020 Total no of order 12 Total cost (annual) 14076 12240

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