Question

Problem 9-11 (Algorithmic)

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:

	Supplier
Component	1	2	3
1	$11	$11	$13
2	$10	$12	$10

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:

Supplier	1	2	3
Capacity	575	1000	775

If the Edwards production plan for the next period includes 1050 units of component 1 and 775 units of component 2, what purchases do you recommend? That is, how many units of each component should be ordered from each supplier?

	Supplier
	1	2	3
Component 1
Component 2

What is the total purchase cost for the components?

$  

Answer 1

Given price data for each component from each supplier are

		Supplier
Component	1	2	3
1	$ 11	$11	$13
2	$10	$12	$10

Supplier capacity are as follows

Supplier	1	2	3
Capacity	575	1000	775

Now if Edward production company orders 1050 units of component 1, he can purchase from suppliers1 & 2 with minimum cost. 50 from supplier 1 and 1000 from supplier 2

So total cost for component 1 =( 50*11$) +(1000*11$)= 11,550$

For component 2, Edwards production company can purchase with min cost from both supplier 1&3. As all the 775 units are available with supplier 3, he can purchase all of them from supplier 3 with min cost.

So total cost for component 2 = 775*10$ = 7750$

So total purchase cost for the components is 11,550$ + 7750$ = 19300$