A company is buying essential component from a solo supplier. (46) Show your calculation completely to get the full mark.

Based on given data below, find the total cost ownership.

Late delivery of component result in 40% lost sales & 60% backorder of finished products.

Order lot size

7,000

Annual forecast/Requirements

56,000 units

Weight per part

15 pounds

Order processing cost

$400/order

Inventory carrying rate

20% per year

Cost of working capital

12% per year

Profit margin

19%

Price of finished products

$520

Back order cost

$10 per unit

Supplier

Price of component (Cost)

$50

Payment Term

3/10 Net 30

Distance

200 miles

Supplier Quality Rating

2%

Supplier Delivery Rating

1%

Truckload

(TL 40,000 lbs):

$0.85 per ton-mile

Less-than-truckload (LTL):

$1.15 per ton-mile

Note: per ton-mile = 2,000 lbs per mile

a. Total Component cost (4)

b. Discount saving (4)

c. Late Payment Saving (4)

d. (decision making about late payment or using discount) (4)

e. Transportation Cost (4)

f. Ordering Cost (4)

g. Carrying Cost (4)

h. Quality Cost (4)

i. Delivery rating cost

I. Backorder (4)

II. Lost Sales (4)

j. Total cost (6)