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NOTE: You are required to use a full-length graph paper and draw graphs by using a straight edge or a ruler and showing points clearly. Practice these problems. Your corporation received orders from your customer, MMS, to supply AK49. As a purchasing manager, you contacted a reliable manufacture and supplier that agreed to sell you the product, AK49 @ $150 per unit. You also contacted your accounting department that furnished the following information on in-house manufacturing of AK49: Direct material: $64 per unit Direct labor: $26 per unit Overhead and other fixed cost: $90,000 Write cost functions for purchasing AK 49 and for manufacturing in-house. Plot the two cost functions on a graph paper. Use an appropriate scale to show that the two cost functions intersect. For what range of orders would you recommend making AK 49 in house and for what range of orders would you purchase? As a purchasing manager, you are required to purchase internet service for your corporation. You have short-listed two suppliers: Goofey, and Snoopy. And their charges are as follows: Goofey: A minimum of $800 for up to 10,000 minutes $800 plus 7 cents per minute for above 10,000 minutes of usage Snoopy: There is no minimum charge and charges are 8 cents per minute. Write the two cost functions. Plot the two cost functions on a graph paper. Over what range of usage would you select Goofy or Snoopy. As a purchasing manager for Affordable Depot, you collaborate with the marketing, accounting, and engineering departments and strategically manage your procurement activities. You purchase air-conditioner smart thermostats from its manufacturer @ $17.50 per unit and sell to customers for $23 per unit. Operating expenses include storage, transportation, marketing, overhead, etc. and add up to $4.50 per unit. According to a reliable forecast, the current annual sales volume is 120,000 thermostats. You have 3 options: a. Increase the selling price by 2 percent (sales volume will decrease by 2 percent), b. increase sales volume by 4 percent by incurring additional marketing expense of $20,000 (everything else remains the same as the base scenario), or c. work with the manufacturer and get a 3 percent discount on the current cost of goods (everything else remains the same as the base scenario). Compute the percent change in profit for each option with respect to the base profit. Which of the three options will you choose and why? Write your decision in words. Base Scenario Selling price increased by 2 percent Sales volume increased by 4 percent 3 percent discount on cost of goods # of units purchased/sold Selling Price/unit Annual Sales Amount Cost of purchase/unit Cost of Goods Sold Gross Profit or Margin Operating Expenses Operating Profit Increased Profit Percentage Change