Question Completion:
Since the options are not provided, it is assumed that ACME requires 2,000 units of Component X monthly. Which supplier should the company choose?
Answer:
ACME Manufacturing Company
The supplier that should be chosen is:
Supplier A.
Explanation:
a) Data and Calculations:
Quantity of component X required monthly = 2,000 units
Cost of buying from supplier A = $3,000 + ($2.50 * 2,000) = $8,000
Cost of buying from supplier B = $6 * 2,000 = $12,000
Cost of buying from supplier C = $5 * 2,000 = $10,000
b) This cost decision depends on the quantity of component X required by ACME manufacturing. If the quantity were to be less than or equal to 1,100 units, another supplier other than supplier A might be preferred. Again, if there are other considerations apart from cost, supplier A might not be chosen. The implication is that the choice of a supplier for a component depend on many factors.
