requirement 1&2

Roaring Lion 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, 5% of motherboards purchased from Alpha will be inspected and 25% of motherboards purchased from Beta will be inspected. The following data refers to costs associated with Alpha and 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 Roaring Lion consider? Data Table Requirement 1. What is the relevant cost of purchasing from Alpha and Beta? Alpha Beta Calculate the relevant cost of purchasing from Alpha and Beta. Number of orders per year 70 70 Alpha Beta 16,000 16,000 Purchase costs 1504000 1440000 $ 94 $ 90 630 420 Ordering costs Inspection costs $ 9 $ 6 $ 5 $ 5 Required annual return on investment 200 units 200 units Stockout costs 1000 3600 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 200 600 Return costs 1610 16100 $ 5 $ 6 Other carrying costs 38400 38400 70 700 Total cost $ 23 $ 23 10% 10% Other carrying cost per unit per year $ 2.40 $ 2.40