A buyer received bids and other relevant information from

part for its latest product. Given the following information,

which supplier should be chosen. Late delivery of the good
backorders of finished goods.

Order lot size

Requirements (annual)
Weight per engine
Order processing cost
Inventory carrying cost
Cost of working capital
Profit margin
Price of finished goods
Back-order costs

UNIT PRICE
1 TO 999 units/order
1000 to 2999 units/order
3000+ unit/order
tooling cost
terms
Distance (miles)
Supplier quality rating
supplier delivery rating

Truckload (TL= 40,000 lbs)$0.095

Less than truckload
$1.20
Note: Per ton-mile= 2,000 lbs per mile

per ton-mile
per ton-mile

elevant information from three suppliers for a vital component

he following information, use total cost analysis to determine
Late delivery of the goods results in 70% of lost sales and 30%

2,000
240,000
40
$
200.00
20%
10%
15%
$ 10,500.00
$
120.00

SUPPLIER 1
$
$
$
$
2/10, net 30
120
2%
1%

trips

120

pounds
/order
per year
per year

per unit

200.00
195.00
190.00
12,000.00

SUPPLIER 2
$
205.00
$
190.00
$
185.00
$
10,000.00
1/15, net 30
100
1%
1%

SUPPLIER 3
$
198.00
$
192.00
$
190.00
$
15,000.00
1/10 net 20
150
2%
2%

Description
total engine cost
Cash discount
n/30, n/30, n/20
discount 2/10, 1/15, 1/10
tooling cost
transportation cost
ordering cost
Carrying cost
Quality cost
Delivery rating
back order
lost sales
Total costs

SUPPLIER 1
46,800,000.00

$
$
$
$
$
$
$

384,657.53
1,064,219.18
12,000.00
547,200.00
24,000.00
39,000.00
936,000.00

$
$
$

86,400.00
2,646,000.00
50,026,380.82

IT IS WISE TO CHOOSE SUPPLIER 2 AS THE COST QUOTED BY

PLIER 1
46,800,000.00 $

SUPPLIER 2
45,600,000.00

SUPPLIER 3
46,080,000.00

$
$
$
$
$
$
$

374,794.52
643,397.26
10,000.00
456,000.00
24,000.00
38,000.00
456,000.00

$
$
$
$
$
$
$

252,493.15
587,046.58
15,000.00
684,000.00
24,000.00
38,400.00
921,600.00

86,400.00 $
2,646,000.00 $
50,026,380.82 $

86,400.00
2,646,000.00
48,673,002.74

$
$
$

172,800.00
5,292,000.00
52,640,753.42

384,657.53
1,064,219.18
12,000.00
547,200.00
24,000.00
39,000.00
936,000.00

COST QUOTED BY HIM IS LOWER COMPARED TO THE OTHERS IN EVERY ASPECT

PLIER 3
46,080,000.00
252,493.15
587,046.58
15,000.00
684,000.00
24,000.00
38,400.00
921,600.00

172,800.00
5,292,000.00
52,640,753.42

EVERY ASPECT .