ASSIGNMENT QUESTIONS
1. What were PAEs total costs per year prior to the new price structure when the Series 10 generators price was $410? Was PAE using the EOQ method?
2. With all-units quantity discounts and warehouse constraints, what is the best ordering quantity?
3. With purchase discounts and different rates, how are costs and EOQs affected?
4. How will these changes impact the lean manufacturing philosophy at PAE?
5. Determine the cost impact of using the Texas supplier. How will the change in supplier for the Series 10 generator affect PAEs sales? Your analysis must be thorough and convincing.

CASE 24: PHILADELPHIA AIRCRAFT EQUIPMENT, INC. 24 In January 2020, Emily Wang, the purchasing manager for Philadelphia Aircraft Equipment (PAE), Inc., received a call from their Tier 1 power generator supplier in New Jersey informing her that effective June 30,2020 they would discontinue production of the Series 10 power generator. The Series 10 generator is currently used as the auxiliary power source in go\% of PAE's products. Emily was in shock! After recovering from the initial trauma, Emily began calling all possible supply sources. After talking with more than 10 potential supply sources, she found Texas Generators, Inc., located in Mansfield, Texas. Texas Generators submitted the following price scheduling: 24 Names and data have been disguised. Copyright 2020 W. C. Benton All rights reserved. Units Unit Price Q100..$480 100>Q200.$470 Q>200.455 Texas Generators' prices are significantly higher than the New Jersey supplier. The traffic department informed Emily that the transportation cost per hundredweight is $6 for carloads of 50,000 pounds. The less-than-carload rate is $9 per hundredweight. The replenishment cycle normally takes one week. Emily was concerned because PAE used 10 Series 10 generators each working day of the month. (PAE operated on a 20-day-per-month schedule.) Each generator weighs 500 pounds. Generator orders are currently placed every Monday morning. For the past 10 years, the Series 10 generator had been produced in New Jersey. Ms. Wang felt fortunate that the New Jersey producer was located approximately 60 miles from her facility. The New Jersey supplier offered just-in-time delivery service at no charge to PAE. PAE implemented lean manufacturing in 2015. The kanban-controlled JIT production system was implemented based on the premise of minimizing work-in-process inventories (waste) by reducing lot sizes to increase production efficiency and product quality. Emily's Decision Ms. Wang compiled cost and warehouse capacity data on the Series 10 generator from the sccounting department (see Table C.1). She wonders what effects these new developments will have on her cost structure. 1. What were PAE's total costs per year prior to the new price structure when the Series 10 generator's price was \$410? Was PAE using the EOQ method? 2. With all-units quantity discounts and warehouse constraints, what is the best ordering quantity? 3. With purchase discounts and different rates, how are costs and EOQs affected? 4. How will these changes impact the lean manufacturing philosophy at PAE? 5. Determine the cost impact of using the Texas supplier. How will the change in supplier for the Series 10 generator affect PAE's sales? Your analysis must be thorough and convincing