Question
Ellery Products manufactures various components for the fashion industry. Ellery buys fabric from two vendors: Ewers Textiles and Bramford Materials. Ellery chooses the vendor based
Ellery Products manufactures various components for the fashion industry. Ellery buys fabric from two vendors: Ewers Textiles and Bramford Materials. Ellery chooses the vendor based on price. Once the fabric is received, it is inspected to ensure that it is suitable for manufacturing purposes. Ellery disposes of fabric that is deemed unsuitable.
The controller at Ellery collected the following information on purchases for the past quarter:
Ewers | Bramford | |
---|---|---|
Total purchases (yards) | 19,800 | 36,900 |
Fabric discarded (yards) | 990 | 4,428 |
The purchasing manager has just received bids on an order for 800 yards of fabric from both Ewers and Bramford. Ewers bid $2,261 and Bramford bid $2,134.
Assume that the average quality, measured by the amounts discarded from the two companies, will continue as in the past.
Required:
a. What bid by Ewers would make Ellery indifferent between buying from Ewer or Bramford?
Note: Round your answer to 2 decimal places.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started