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Cougar 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.) i Data Table Requirements 1. What is the relevant cost of purchasing from Alpha and Beta? 2. What factors other than cost should Cougar consider? Requirement 1. What is the relevant cost of purchasing from Alpha and Beta? Alpha Beta Number of orders per year 80 80 Calculate the relevant cost of purchasing from Alpha and Beta. Annual motherboards demanded Beta Alpha 1638000 Price per motherboard Purchase costs 1548000 Ordering cost per order $ $ $ 18,000 91 12 7 100 units $ $ $ Ordering costs Inspection cost per unit Inspection costs Required annual return on investment Average inventory level Expected number of stockouts 100 18,000 86 9 7 100 units 300 9 800 23 10% 2.90 Stockout costs $ $ Return costs Stockout cost (cost of rush order) per stockout Units returned by customers for replacing motherboards Cost of replacing each motherboard Other carrying costs $ 5 80 23 10% 2.90 $ Total cost Required annual return on investment Other carrying cost per unit per year $ $ Print Done Cougar 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.) i Data Table Requirements 1. What is the relevant cost of purchasing from Alpha and Beta? 2. What factors other than cost should Cougar consider? Requirement 1. What is the relevant cost of purchasing from Alpha and Beta? Alpha Beta Number of orders per year 80 80 Calculate the relevant cost of purchasing from Alpha and Beta. Annual motherboards demanded Beta Alpha 1638000 Price per motherboard Purchase costs 1548000 Ordering cost per order $ $ $ 18,000 91 12 7 100 units $ $ $ Ordering costs Inspection cost per unit Inspection costs Required annual return on investment Average inventory level Expected number of stockouts 100 18,000 86 9 7 100 units 300 9 800 23 10% 2.90 Stockout costs $ $ Return costs Stockout cost (cost of rush order) per stockout Units returned by customers for replacing motherboards Cost of replacing each motherboard Other carrying costs $ 5 80 23 10% 2.90 $ Total cost Required annual return on investment Other carrying cost per unit per year $ $ Print Done

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