LM.82 Nottingham Equipment sells high-end food processing equipment and systems

Question

LM.82 Nottingham Equipment sells high-end food processing equipment and systems to food processing plants. They are seeking bids for a powerful electric motor which will be used in one of their new products. Their forecasts show they will need 400 units per month. They have two supplier options: one domestic and one foreign. The table below summarizes the costs for these two options. Note that the administrative fee is a monthly flat fee, not a per-unit fee. Criteria Domestic Foreign Price/Unit $24.65 $22.20 Packaging Cost/Unit $1.07 $1.25 International Shipping/Unit $0 $1.15 Freight Forwarder Fee/Unit $0 $0.02 U.S. Port Handling/Unit $0 $0.35 Inland Freight/Unit $1.34 $1.49 Flatt Fee Admin Cost/Month (not per unit) $25 $100 What is the total landed cost (per month) for the domestic supplier? (Display your answer as a whole number.) What is the total landed cost (per month) for the foreign supplier? (Display your answer as a whole number.) Suppose actual demand is only 85% of expected demand. What would be the total landed cost of the domestic supplier? (Display your answer as a whole number.) At what volume of demand would the total cost be the same for the domestic supplier and the foreign supplier? (Display your answer as a whole number.) Save

Explanation / Answer

Equal at

Domestic Foreign D Demand monthly 400 400 P Price/unit 24.65 22.2 PC Packing cost/unit 1.07 1.25 S Int Shipping /Unit 0 1.15 Ph Port handling/unit 0 0.35 FW Freight forwarder Fee/Unit 0 0.02 I Inland frieght/Unit 1.34 1.49 A Admin fee 25 100 VC= PC+S+I+Ph+Fw Total vaiable cost 27.06 26.46 As per units TC=D*VC+A Total Landed cost 10849 10684 Ans B Ans A

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