Dropdown 1 options: Abbott, Baker, Carpenter Dropdown 2 options: 20,000 , 10,000

Question

Dropdown 1 options: Abbott, Baker, Carpenter
Dropdown 2 options: 20,000 , 10,000

Horizon Cellular manufactures cell phones for exclusive use in its communication network. Management must select a circuit board supplier for a new phone soon to be introduced to the market. The annual requirements (D) are 50,000 units and Horizon's plant operates 250 days per year. The data for three suppliers are in the following table Annual Freight Costs Shipping Quantity (Q) Annual Administrative Cost Price/Unit Annual Holding Lead Time Supplier 10,000 ost/Unit (H)(L) (days) Abbott Carpenter Which supplier and shipping quantity will provide the lowest total cost for Horizon Cellular? 20,000 $10,000 $7,000 $9,000$6,000 $8,000$6,000 $31 $30 $29 $6.20 $6.00 $5.80 $10,000 $9,000 $8,000 7 and a shipping quantity of to Horizon Cellular of S(Enter your response as an integer.) Vunits is the lowest cost alternative, with annual total costs

Explanation / Answer

Let's calculate total cost for each suppliers and quantity level

Carpenter and 10,000 units

Supplier quantity level Total Cost Quantity Level Total cost Abbott 10,000 10,000*(50,000/10,000)+(10,000/2)*6.20= $81,000 20,000 7,000*(50,000/20,000)+(20,000/2)*6.20= $79,500 Baker 10,000 9,000*(50,000/10,000)+(10,000/2)*6= $75,000 20,000 6,000*(50,000/20,000)+(20,000/2)*6= $75,000 Carpenter 10,000 8,000*(50,000/10,000)+(10,000/2)*5.8= $69,000 20,000 6,000*(50,000/20,000)+(20,000/2)*5.8= $73,000

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