Answer Happy

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 1,000
each. 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: PLEASE DO NOT DO THE
TEXTBOOK SOLUTION . Step by step definitely, but the textbook
solutions are always much harder to understand than when a person
answers it.
to use. The following data have been collected: 12,000 units Requirements (annual forecast) Weight per engine 22 pounds Order processing cost $125 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 (1,000/2 = 500 units). Two qualified suppliers have submitted the following quotations: SUPPLIER 1 UNIT PRICE SUPPLIER 2 UNIT PRICE ORDER QUANTITY 1 to 1,499 units/order $510.00 $505.00 1,500 to 2,999 units/order 500.00 $505.00 3,000+ units/order 490.00 488.00 $22,000 $20,000 Tooling costs Distance 125 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. Perform a total cost of ownership analysis and select a supplier.