Question

Edwards Manufacturing Company purchases two component parts from three different suppliers. The suppliers have limited capacity and no one supplier can meet all the company's needs. In addition, the suppliers charge different prices for the components. Component price data (in price per unit) are as follows:Supplier Component 1 2 31 $10 $12 $142 $10 $10 $11Each supplier has a limited capacity in terms of total number of components it can supply. However, as long as Edwards provides sufficient advance orders, each supplier can devote its capacity to component 1, component 2, or any combination of the two components, if the total number of units ordered is within its capacity. Supplier capacities are as followsSupplier 1 2 3Capacity 600 1050 775If the Edwards production plan for the next period includes 1050 units of component 1 and 800 units of component 2, what purchases do you recommend? The is, how many units of each component should be ordered from each supplier?Supplier 1 2 3Component 1 Component 2 What is the total purchase cost for the components?

Answer 1

Answer:

Edwards Manufacturing Company

1. Number of units to order from each supplier:

Suppliers                          1            2           3      Total

Component 1               600        450         0       1,050

Component 2                  0        600      200        800

Total ordered              600     1,050      200      1,850

2. The total purchase cost for the components is:

= $19,600.

Explanation:

a) Data and Calculations:

Component price

Supplier              1         2        3

Component 1  $10     $12    $14

Component 2 $10     $10    $11

Suppliers' Capacities

Supplier              1         2        3

Component 1  

Component 2

Total capacity 600   1,050   775

Edwards Production Plan

Component 1 = 1,050 units

Component 2 = 800 units

Objective:

Minimize Total Cost = $19,600

Constraints:

Total Supplier 1 <= 600

Total Supplier 2, <= 1,050

Total Supplier 3, <= 775

Total Component 1, = 1,050

Total Component 2, = 800

                                      Component 1                   Component 2

Suppliers                     1           2           3              1           2           3

Numbers of units to

order from supplier 600     450         0               0       600    200

Total units                      1,050                     +                        800

                                       Component 1                   Component 2

Suppliers                     1           2           3              1           2           3

Numbers of units to

order from supplier 600     450         0               0       600    200  

Price of units             $10      $12       $14          $10        $10      $11

Total costs          $6,000 $5,400       $0           $0  $6,000   2,200

= $19,600

Number of units to order from each supplier:

Suppliers                          1           2           3      Total

Component 1               600       450         0       1,050

Component 2                  0       600      200        800

Total ordered              600     1,050      200      1,850

Capacity of suppliers 600     1,050       775