INFORMATION NEEDED TO ANSWER QUESTION #4

Offer 1

($48/square feet per year)*(500 square feet) = ($24,000) / (7,200 units per year) = $3.33 per unit

($300,000 payroll)*(40% overhead) = ($120,000) + ($300,000) = ($420,000) / (7,200 units per year) = $58.33 per unit

($10 holding cost per dozen per month)*(600 dozen per year) = ($6,000) / (7,200 units) = $0.83 per unit

$3.33 + $58.33 + $0.83 = $62.39 per unit

(4%)*($62.39) = $2.50 per unit

(15%)*($62.39) = $9.36 per unit

$62.39 + $2.50 + $9.36 = $74.25 per unit

$74.25 + $7 = $81.25 per unit

Offer 2

($48/square feet per year)*(500 square feet) = ($24,000) / (7,200 units per year) = $3.33 per unit

($300,000 payroll)*(40% overhead) = ($120,000) + ($300,000) = ($420,000) / (7,200 units per year) = $58.33 per unit

(50 dozen per month)*(78 sum of months' digits) = ($3,900)*(12 months) = ($46,800) / (7,200 units) = $6.50 per unit

$3.33 + $58.33 + $0.83 = $68.16 per unit

(4%)*($68.16) = $2.73 per unit

(15%)*($68.16) = $10.22 per unit

$68.16 + $2.73 + $10.22= $81.11 per unit

$81.11 + $6.25 = $87.36 per unit

4. Develop a recommendation with regards to accepting one of the supplier's offers. (Learning Objective 4.2)

OFFER #1 & 2

EOQ = SQUARE ROOT OF 2DS/H (USING THIS FORMULA