Edwards Manufacturing Company purchases two component parts from three different

Question

Edwards Manufacturing Company purchases two component parts from three different suppliers. The suppliers have limited capacity, and no one supplier can meet all the company’s needs. In addition, the suppliers charge different prices for the components. Component price data (in price per unit) are as follows:

Each supplier has a limited capacity in terms of the total number of components it can supply. However, as long as Edwards provides sufficient advance orders, each supplier can devote its capacity to component 1, component 2, or any combination of the two components, if the total number of units ordered is within its capacity. Supplier capacities are as follows:

If the Edwards production plan for the next period includes 1000 units of component 1 and 800 units of component 2, what purchases do you recommend? That is, how many units of each component should be ordered from each supplier? Round your answers to the nearest whole number.

What is the total purchase cost for the components? Round your answer to the nearest dollar.

$  

Supplier Component 1 2 3 1 $11 $10 $13 2 $10 $11 $11 Probles 4 11 (Algorithmic) It the Ed ards product on p ar for the next pe od dades 1000 units of oor one t 1 and 800 an s of component 2 at pu ases do you eco n end? Tho s ho many u s o each componerr ?? d be o dered fro coch 2 ppic ? RD nd your ? e ery to the nearez toen or Previous

Explanation / Answer

Answer:

Strategy : Highets volume to lowest rate supplier, so that we can liverage the highets profit.

For 1 component, demand is 1000 nos -The lowest price is from supplier 2, which has capacity of 1050 nos. Thus we can plan to purchase 1000 nos. from supplier 2 @ $ 10 unit price (which is lowets price). Still it has capacity for 50 nos. left.

For Component 2, demand is 800 nos. - The lowest price is with supplier 1, which has capacity 650 nos. Thus we will plan to purchase 650 nos. from supplier 1 @ $ 10 unit price (which is lowest price). Remaining 150 nos. can be purchased from either supplier 2 or 3 as both have same unit price. Thus we will give order to supplier 3 so that he will also get some order from the firms. Thus the orders for each component to each supplier is as below.

Total Purchase cost = Order quantity * unit purchase cost for each supplier = $ 18150 /-

Component Supplier 1 2 3 Price for 1 component $11 $10 $13 Price for 2 component $10 $11 $11 Capacity ( in nos.) 650 1050 850 Total Order for 1 component
(Total Demand - 1000 nos) 0 1000 0 1000 Order for 2 component
(Total Demand - 800 nos) 650 0 150 800

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