Wanda Lux must select a supplier for a plastic bottle and proprietary dispenser
ID: 2812521 • Letter: W
Question
Wanda Lux must select a supplier for a plastic bottle and proprietary dispenser for its new hair shampoo. Three suppliers have placed bids; at Wanda's request, all bids are for a shipping quantity (Q) of 20,000 bottles with annual requirements (D) of 40,000 units. Wanda's factory operates 250 days a year. The following table shows each supplier's price, estimated annual freight costs, and current lead times; management has added estimates for holding costs and administrative oversight costs for each supplier Supplier Dover Plastics Evan & Sons Farley, Inc. Freight Price/Unit Annual Holding Lead Time Annual Administrative Costs $4,500 $3,000 $4,000 Cost/Unit (H) $1.01 $1.03 Costs $6,000 $3,000 (L) (da $5.05 $5.15 $5.00 15 20 a. Which of the three suppliers will provide the lowest annual cost to Wanda Lux? Using | | is the lowest cost alternative, with annual total costs to Wanda Lux of $1-(Enter your response rounded to the nearest whole number.)Explanation / Answer
Daily requirement (d) = 40,000 / 250 = 160
Total annual cost = material cost + freight cost + Inventory cost + Administrative cost
TDover = (5.05*40000) + 4500 + ( (20000/2) + (160*14*1.01) ) + 6000 = 224762
TEvan = (5.15*40000) + 3000 + ( (20000/2) + (160*15*1.03) ) + 3000 = 224472
TFarley = (5.00*40000) + 4000 + ( (20000/2) + (160*20*1.00) ) + 4000 = 221200
Farley Inc is lowest cost with $221,200
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