MGT301 Assignment 4 Solution

Question 1

Your company makes snow blowers and this winter they have been selling very well.  You are evaluating a quote from a supplier for engines that power your snow blowers.  The quote is as follows:

Supplier 1

Price

$90

Terms

2% 10 Net 45

Distance

200

Minimum order quantity

1500

Weight

20 lbs

Assume the following:

Annual volume for engines is expected to be 90,000 units

The price is constant regardless of volume or order quantity

Inventory holding rate is 25%

Working capital costs are 12%

Your order quantity will always equal the minimum order quantity for the supplier

Your freight rate is $1.75 per ton mile for a full truckload (40,000 lbs) and $2.00 for a less-than-truckload shipment

There are 360 days in a year.

There are 2000 lbs/ton

Order costs, tooling costs, quality costs, late-delivery costs should be ignored.

What is the total cost of ownership for supplier 1?  (Show your work.)

Question 2

A company using a weighted-criteria evaluation system has established these 3 categories for supplier evaluation and the appropriate weight are in parentheses: Quality(0.50), Technology(0.20), Cost(0.30).  The scores for each category for Company C are: Quality(66), Technology(90), Cost(80)

What is company C’s weighted average score? (Show your work.)

Question 3

You are using the break-even analysis to decide whether to make or buy a part.  The variable costs are $10 to buy and $5 to make.  The fixed costs are $10,000 to buy and $510,000 to make.  What is the break-even point?  If your annual requirements for this part are 200,000, should you make or buy the part? (Show your work.)