# Supplier Selection and Cost Calculation for Engine Orders Let's break down the problem and the solution as shown in the screenshots: ## Problem Summary - **Requirement:** 16,200 engine units per year. - **Engine weight:** 25 lbs each. - **Order processing cost:** $150 per order. - **Inventory carrying cost:** 20% of average value per year. - **Order in lot sizes:** 1,350 units (from the question context, as 16,200 / 12 ≈ 1,350). - **Two suppliers** to choose from. ## Part a-1: Calculate the Total Cost for Each Supplier You are asked to calculate the total cost for each supplier. The screenshots show: | Supplier | Total Cost | |-------------|------------| | Supplier 1 | $2,430 | | Supplier 2 | $9,558 | Your selection is **Supplier 2**, but the answer is marked as not entirely correct, suggesting a possible calculation or interpretation error. --- ## Part b-1: Adjust Lot Size to Full Truckload and Calculate Total Cost You are asked to recalculate the total cost if you could move the lot size up to ship in truckload quantities. | Supplier | Total Cost | |-------------|--------------| | Supplier 1 | $9,696 | | Supplier 2 | $9,654,880 | Again, the answer is marked as not entirely correct. --- ## Part b-2: Would Your Supplier Selection Change? You chose **No**, meaning you would stick with Supplier 2. --- # **Step-by-Step Calculation Approach** Let's clarify how these numbers should be calculated: ### 1. **Annual Demand (D):** - \( D = 16,200 \) units/year ### 2. **Order Quantity (Q):** - Lot size (from context): \( Q = 1,350 \) units/order - Number of orders/year = \( D / Q = 16,200 / 1,350 = 12 \) orders/year ### 3. **Order Cost:** - \( 12 \) orders/year × $150/order = **$1,800/year** ### 4. **Inventory Carrying Cost:** - Average inventory = \( Q/2 = 1,350/2 = 675 \) units - Carrying cost = 20% × (average inventory × cost per unit) - You need the cost per unit from each supplier (not given in the screenshots—this may be why the answer is "not entirely correct"). ### 5. **Purchase Cost:** - \( D \times \) (cost per unit) ### 6. **Total Cost:** - \( \text{Order Cost} + \text{Inventory Carrying Cost} + \text{Purchase Cost} \) --- ## **Summary Table** | Component | Formula | Needed Info | |--------------------------|--------------------------------------|---------------------| | Order Cost | (\# orders/year) × (cost/order) | $150/order | | Inventory Carrying Cost | .2 × (avg. inventory × unit cost) | Unit cost needed | | Purchase Cost | (Total units/year) × (unit cost) | Unit cost needed | | **Total Cost** | Order + Inventory + Purchase | | --- ## **Final Summary** - **You must have the unit cost for each supplier** to accurately compute the inventory carrying and purchase costs. This is likely missing from your calculation, leading to the "not entirely correct" answer. - **Supplier 2** is shown as your chosen supplier, but with the numbers in the screenshot, **Supplier 1** is actually cheaper in both scenarios (unless unit costs are different). - **To finalize your answer:** - Ensure you use the *same unit cost for all orders* based on the full truckload lot size. - Use the formulas above for accurate calculation. - **Your supplier selection should be based on the lowest total cost.** Double-check your unit costs from each supplier and recalculate if necessary. --- ## **Key Takeaways** - Clearly define and use unit costs from each supplier. - Follow the lot size and order quantity logic carefully. - Select the supplier with the lowest *total* annual cost. --- **If you provide the unit costs for Supplier 1 and Supplier 2, I can give you a precise calculation and final recommendation.**

# Supplier Selection and Cost Calculation for Engine Orders ## Problem Summary - **Annual Requirement:** 16,200 engines - **Engine Weight:** 25 lbs each - **Order Processing Cost:** $150 per order - **Inventory Carrying Cost:** 20% of average inventory value per year - **Lot Sizes Allowed:** 1, 3, 5, 0 units - **Suppliers:** Two options to choose from ## Part A: Total Cost Calculation for Each Supplier ### Given Data - **Lot Size:** 1,350 units (assuming based on \( \frac{16,200}{12} \)) - **Number of Orders:** \( \frac{D}{Q} = \frac{16,200}{1,350} = 12 \) orders per year ### Calculations 1. **Order Cost:** \[ \text{Order Cost} = \text{Number of Orders} \times \text{Cost per Order} = 12 \times 150 = 1,800 \text{ USD} \] 2. **Inventory Carrying Cost:** - **Average Inventory:** \[ \text{Average Inventory} = \frac{Q}{2} = \frac{1,350}{2} = 675 \text{ units} \] - **Carrying Cost:** \[ \text{Carrying Cost} = 0.2 \times (\text{Average Inventory} \times \text{Cost per Unit}) \] 3. **Purchase Cost:** \[ \text{Purchase Cost} = D \times \text{Cost per Unit} \] 4. **Total Cost:** \[ \text{Total Cost} = \text{Order Cost} + \text{Carrying Cost} + \text{Purchase Cost} \] ### Conclusion for Part A Without the unit costs for each supplier, I cannot provide accurate total costs. Assuming costs were provided, here’s how they would be calculated for each supplier. **Example Calculation:** - **Unit Cost for Supplier 1:** $X - **Unit Cost for Supplier 2:** $Y Total costs would be calculated as: - For Supplier 1: \[ \text{Total Cost}_1 = 1,800 + (0.2 \times 675 \times X) + (16,200 \times X) \] - For Supplier 2: \[ \text{Total Cost}_2 = 1,800 + (0.2 \times 675 \times Y) + (16,200 \times Y) \] --- ## Part B: Adjust Lot Size to Truckload and Calculate Total Cost ### Adjustments If we change the lot size to full truckload quantities, we need to recalculate the total costs. ### Calculations 1. **Truckload Calculation:** - Assume a truckload size is determined (for example, 1,800 units). - **Number of Full Truckloads Required:** \[ \text{Truckloads} = \frac{D}{\text{Truckload Size}} = \frac{16,200}{1,800} = 9 \text{ truckloads} \] - **Order Cost:** (based on truckloads) \[ \text{Order Cost} = 9 \times 150 = 1,350 \text{ USD} \] 2. **Carrying Cost and Purchase Cost:** - Similar calculations as above, but with adjusted average inventory based on the new lot size. ### Conclusion for Part B Again, without the specific unit costs from the suppliers, I cannot provide accurate total costs. --- ## Final Summary - **Correct Answers:** The calculations for total costs depend on the unit costs for each supplier, which are currently unknown. - **Review Calculation Process:** - Ensure to utilize the same unit cost for all orders based on truckload sizes. - Perform calculations for total costs accurately with the provided formulas. - **Supplier Selection:** The supplier with the lowest total cost should be selected based on accurate calculations. **If you provide the unit costs for Supplier 1 and Supplier 2, I can finalize the calculations and recommendations.**