Question

1. Determine which supplier or suppliers should be used for 2013 and beyond. Consider both financial and resilience aspects of this recommendation.

2. Table B3 – Cost and Capacity Study for i-AM Tablet Screen Expansion
   Precision Optics Co.
   	Current Operations		Projected Operations
   (and future ops without expansion)
   Cost per unit	$12.87	per unit	$13.54	per unit
   Maximum Capacity	1,000	units per day		1,600
   Expansion Costs			$600,000
   Top-Quality Screens of California
   Current Operations	Projected Operations
   Start-Up costs	$890,000
   Certification cost	$100,000
   Estimated lead-time to reach Full production	6 months
   Cost per unit	N/A		$11.79	per unit
   Maximum Capacity	None		800	units per day
   Top Quality
   Onetime cost	$                          990,000
   Cost per unit	$                3,442,680.00
   Lead time	6 months
   Precision Optics
   	Current Operations	Projected Operations
   Cost per unit	$4,697,550.00	$7,907,360.00
   Onetime cost	$0	$600,000

Answer 1

Assessment of Top Quality as a Supplier

Onetime cost = 990000 $

Rate per unit = 11.79 $

No. of Units per day = 800

No. of days in a Year = 365

Total DIrect Cost for the Year = 11.79*800*365 = 3,442,680

Total Cost = 3442680+990000=4432680.00

Assessment of Precision Optics Co.

Expansion Cost = 600000 $

No. of Units per day = 1600(after expansion) No. of Units per day (before expansion)=1000

Rate per unit = 13.54 $ ( after expansion ) Rate per unit (Currently) = 12.87 $

Current cost per year (Currently) = 12.87 $ * 1000 * 365 = 4697550 $

Overall Assessment

1. the present case, A company has to choose from whom it would procure the Material. There are 2 options available in front of the company.One is "Top Quality" and the other is"Pepsico Optics Company"

2. Pepsico Optics is currently manufacturing the product at the rate of 1000 units per day and at a cost of 12.87 $ Per unit. whereas on the other hand Top Quality has no prior experience in Manufacturing the product bu it can do so in 6 months time and at Cost lower than Pepsico at the rate of 800 units per day and at a cost of 11.79 $ which is $1.08 cheaper than Pepsico.

3. Pepsico has a Expansion cost of 600000$ whereas Topquality has a Onetime cost of 990000 $ .

4. Therefore advisable to the company.

a.) They Should invest in the Top Quality at the cost 990000.00 which would be recovered if company procures

990000/1.08=916667 units

b.) In the presesnt scenario as the company is requiring product it can for the time being purchase from pepsico 1000 units and then shift its purchase to Top Quality so the preference is as follows

First Six Months

a. 1000 units from Pepsico

After Six Months

a. 800 from Top QUality

b. 1000 from Pepsico

c. if needed then invest in pepsico and purchase extra 600 units.