Homework Answers
Question – a:
Total Annual Cost = Number of orders*Freight Cost + D*price/unit + (Q/2)*Holding cost + Annual Administrative Cost
Number of Orders = D/Q = 2 for all
For Dover Plastics:
Total Annual Cost: 2*3500 + 40000*5.15 + 10000*1.03 + 5000 = $228300
For Evan & Sons:
Total Annual Cost: 2*4500 + 40000*5.05 + 10000*1.01 + 3000 = $224100
For Farley. Inc.:
Total Annual Cost: 2*4000 + 40000*5.00 + 10000*1.00 + 6000 = $224000
Answer is: Using Farley is the lowest cost alternative with annual total costs to Wanda Lux of $ 224000
Question – b:
Rating for Dover is 7 (as cost is highest)
Rating for Evan is 8.5 (second highest cost)
Rating for Farley is 10 (Lowest Cost)
Weighted score for Dover: (30*7 + 30*9 + 20*8 + 20*9)/100 = 820/100 = 8.2
Weighted score for Evan: (30*8.5 + 30*8 + 20*8 + 20*7)/100 = 795/100 = 7.95
Weighted score for Farley: (30*10 + 30*9 + 20*9 + 20*7)/100 = 890/100 = 8.9
Answer is: Wanda should award the contract to Farley, whose total weighted score is 8.9.
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