Cougar Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates in the two companies, 10% of motherboards purchased from Alpha will be s inspected and 30% of motherboards purchased from Beta will be inspected. The following data refer to costs associated with Alpha and mil Beta: Click the icon to view the data.) Requirements 1. What is the relevant cost of purchasing from Alpha and Beta? 2. What factors other than cost should Cougar consider? Requirement 1. What is the relevant cost of purchasing from Alpha and Beta? Calculate the relevant cost of purchasing from Alpha and Beta. Alpha Beta Purchase costs Ordering costs Inspection costs Required annual return on investment Stockout costs Return costs Other carrying costs Total cost Which company has a lower relevant cost? How much will Cougar save by purchasing from this company? Requirement 2. What factors other than cost should Cougar consider? Cougar may still choose to use the other company for the following reasons: wo suppliers to use: Alpha or Beta. Due to and Beta Beta Alpha 90 90 10,000 $ 96 10.000 $ 91 $ 15 $ 7 $ 6 $ 6 100 units 100 units Number of orders per year Annual motherboards demanded Price per motherboard Ordering cost per order Inspection cost per unit Average Inventory level Expected number of stockouts Stockout cost (cost of rush order) per stockout Units returned by customers for replacing motherboards Cost of replacing each motherboard Required annual return on investment Other carrying cost per unit per year 100 300 7 $ 6 $ 90 900 25 $ 25 s 10% 10% $ 2.80 $ 2.80 The increased number of inspections may necessitate the need for additional personnel, factory space, and equipment. The other company has a lower purchase price per motherboard, which reduces the total costs. The savings are less than 2% of the total cost of the motherboards. The savings fall between 5% and 10% of the total cost of the motherboards, which is acceptable. With Beta's lower stockouts, Cougar's reputation for availability and on time delivery will be affected. With ten times the number of returns, Beta will probably have a negative effect on Cougar's reputation