A-1. A simple average of the unit price for Supplier 1 and Supplier 2 suggests t

Question

A-1. A simple average of the unit price for Supplier 1 and Supplier 2 suggests the following

Supplier 1 unit price = 633 ; Supplier 2 unit price = 632

1 ton = 2000 pounds, 1 engine weight = 15 pounds, so truck load can carry 133 engines.

Hence the total cost for Supplier 1 = 633 / unit x 15,600 + 23,700 + 0.8 x 120 x 133 = 9,911,268 per annum

Hence the total cost for Supplier 2 = 632 / unit x 15,600 + 21,700 + 0.8 x 100 x 133 = 9,893,668 per annum

A-2. Supplier 2 is cheaper.

A-3. Supplier 2 will still remain cheaper.

Explanation / Answer

1.

value:
25.00 points

Problem 13-12

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 at least 1,300 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 (1,300/2 = 650 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" and final answers to the nearest whole number.)

b-2. Would your supplier selection change?

    

Requirements (annual forecast) 15,600 units Weight per engine 15 pounds Order processing cost $ 200 per order Inventory carry cost 20 percent of the average value of inventory per year

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