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 1,350 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: Requirements (annual forecast) 16,200 units Weight per engine 25 pounds Order processing cost $ 150 per order Inventory carry cost 20 percent of the average value of inventory per year Note: Assume that half of lot size is in inventory on average (1,350/2 = 675 units). Two qualified suppliers have submitted the following quotations: ORDER QUANTITY SUPPLIER 1 UNIT PRICE SUPPLIER 2 UNIT PRICE 1 to 1,499 units/order $ 590 $ 588 1,500 to 2,999 units/order 586 588 3,000 + units/order 584 582 Tooling costs $ 27,500 $ 23,800 Distance 120 miles 100 miles Your assistant has obtained the following freight rates from your carrier: Truckload (40,000 lbs. each load): $0.80 per ton-mile Less-than-truckload: $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.) a-2. Which supplier would you select? multiple choice 1 Supplier 1 Supplier 2
Problem 16-12 (Algo)
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 1,350 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:
| Requirements (annual |
16,200 | units | |
| Weight per engine | 25 | pounds | |
| Order |
$ | 150 | per order |
| Inventory carry cost | 20 | percent of the average value of inventory per year | |
Note: Assume that half of lot size is in inventory on average (1,350/2 = 675 units).
Two qualified suppliers have submitted the following quotations:
| ORDER QUANTITY | SUPPLIER 1 UNIT PRICE |
SUPPLIER 2 UNIT PRICE |
||||
| 1 to 1,499 units/order | $ | 590 | $ | 588 | ||
| 1,500 to 2,999 units/order | 586 | 588 | ||||
| 3,000 + units/order | 584 | 582 | ||||
| Tooling costs | $ | 27,500 | $ | 23,800 | ||
| Distance | 120 miles | 100 miles | ||||
Your assistant has obtained the following freight rates from your carrier:
| Truckload (40,000 lbs. each load): | $0.80 per ton-mile |
| Less-than-truckload: | $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.)
a-2. Which supplier would you select?
multiple choice 1
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Supplier 1
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Supplier 2
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.
b-2. Would your supplier selection change?
multiple choice 2
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Yes
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No
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