Chapter 6: VENDOR ANALYSIS CompuTech Inc. makes circuit boards for personal computers. It is evaluating two possible suppliers of electronic memory chips. The chips do the same job. Although manufacturing quality has been improving, some chips are always defective. Both suppliers will replace defective chips, but the only practical way to test for a defective chip is to assemble a circuit board and "burn it in" (run it and see if it works). When one chip on a board is defective at that point, it costs $2 for the extra labor time to replace it. Supplier 1 guarantees a chip failure rate of not more than 1 per 100 (that is, a defect rate of 1 percent). The second supplier's 2 percent defective rate is higher, but its price is lower. Supplier 1 has been able to improve its quality because it uses a heavier plastic case to hold the chip. The only disadvantage of the heavier case is that it requires CompuTech to use a connector that is somewhat more expensive. Transportation costs are added to the price quoted by either supplier, but Supplier 2 is farther away so transportation costs are higher. And because of the distance, delays