Answered Essay: 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.

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:

Component 1 2 3
1 $10 $14 $13
2 $12 $12 $12

Each supplier has a limited capacity in terms of the 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 follows:

Supplier 1 2 3
Capacity 550 1025 800

If 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? That is, how many units of each component should be ordered from each supplier? Round your answers to the nearest whole number.

1 2 3
Component 1
Component 2

What is the total purchase cost for the components? Round your answer to the nearest dollar.


Expert Answer


Supplier 1 suppies component 1 at the rate of $10

thus, purchasing all the 550 uits of component 1 from supplier 1 to maintain the minimu cost.

550 units of component 1 @ $10 each =$5500

remaining 500 (1050 – 550) units of component 1 should be purchased by supplier 3 because it supplies at next lowest cost i.e.$13 each.

500 units of component 1 @ $13 each = $6500

total cost of buying component 1 is $5500+$6500=$12000

now to buy component 2 we can make it through by remaing capcity of supplier 3 and other remaining by supplier 2 , since both the suppliers offer same price for component 2 i.e.@ $12 each , to make this easy we will only make the purchase from supplier 2 .

800 units @ $12 each =$9600

total cost for the components is $12000+$9600=$21600

COMPONENT-1 $5500    $6500
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