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:

	Supplier
Component	1	2	3
1	$10	$14	$13
2	$12	$12	$12

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	550	1025	800

If the Edwards production plan for the next period includes 1050 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?

	Supplier
	1	2	3
Component 1
Component 2

What is the total purchase cost for the components?

$  

Answer 1

applying given constraint and using excel solver:

		Order quantity:
	Component	1	2	3	total qty	constraint	total
	1	550	0	500	1050	=	1050
	2	0	501	299	800	=	800
		550	501	799
constraint	<=	550	1025	800
	slack	0	524	1
		total cost =		21600

from above:

1)

	Supplier:
Component	1	2	3
1	550	0	500
2	0	501	299

2)

total purchase cost for the components =21600