requirement 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? Requirement 1. What is the relevant cost of purchasing from Alpha and Beta? Calculate the relevant cost of purchasing from Alpha and Beta. Alpha $ 1,504,000 $ 630 Beta 1,440,000 420 4,000 20,000 Purchase costs Ordering costs Inspection costs Required annual return on investment Stockout costs Return costs 1,880 1,000 1,800 3,600 1,610 16,100 480 480 Other carrying costs $ 1,513,600 $ 1,482,400 Total cost Required annual return on investment Stockout costs Return costs 1,880 1,000 1,800 3,600 16,100 480 1,610 480 Other carrying costs $ 1,513,600 $ Total cost 1,482,400 Beta will save Roaring Lion $ 31,200 Requirement 2. What factors other than cost should Roaring Lion consider? Roaring Lion may still choose to use the other company for the following reasons