Question
Morton Corporation manufactures computers and wants to select a supplier to purchase chips for its computers. There are two major suppliers of chips AirBoxChips and
Morton Corporation manufactures computers and wants to select a supplier to purchase chips for its computers. There are two major suppliers of chips AirBoxChips and SoftChips. Uypulac AirBoxChips is a relatively big cdmpany and has a good reputation in terms of reliability and delivery As it is a big company, it provides supply guarantee and sells its products with a higher price Specifically, it charges $120 for each chip that it selis, SoftChips is small company having limited capacity. Even though it charges S0 90 for each chip that it sells, it does not provide supply guararitee. if it is a low-demand year, Softchips is able to satisfy Mortoris demand fully Howeve, If it is a high demand year, it ailocates only 90,000 chips for the purchase of Morton If Morton cannot purhcase chips from nS contracted supplie il buys hips.on the spot market Spot market prices for chips are $2.00 per unit in a low-demand year and $4.00 per unit in a igh deand year Demand in chips has a 755 chance of beng highach ETe ne 7 ve Morten demanded 100,000 chips last year and predicts that its demand Morton must make a deciion with a 2jEar horgen adaelectonly onEppler Assunng a discount rate of 20% and all costs are1OCed at the beginning of each year 0points) Constnicta desion tree. 30 paints) af Morton selecAPO CTple pchag chips what be the net presant value of total cost incurred7 C. 130pomts) if Morton moec s Soletips forpurcheng.ipswhat w DE The tot present value of total cont meured? (10 pointa) Consdering thelatcost.inced oniy h uplierudMatonelet for purchasing chips?
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