Kayo Computer assembles and sells special computers. Each computer needs one custom$-$designed printed

circuit board $($PCB$).$ Kayo has contracted to buy the PCBs from an outside PCB manufacturer, Apex

Manufacturing. The long$-$term contract stipulates that Kayo pays $$200$ per board to Apex for up to $2,000$ PCBs$.$

If the annual order quantity exceeds $2,000$ PCBs$,$ then Apex is obligated to give a discount of $$40$ per board for

the portion beyond $2,000,$ thus selling them at $$160.$

Kayo can also buy the same PCBs from another manufacturer, TCI Electronics, which offers a lower price of

$$120$ per PCB but asks a one$-$time payment of $$100,000$ as a nonrefundable design and engineering fee. As a

purchasing manager, you have determined that Kayo may use PCBs from either of the two manufacturers, or

from both in any mixture without any manufacturing cost or compatibility problems.

The PCB along with other components are assembled by Kayo into its special computer. The variable assembly

cost of the Kayo special computer is $$450$ each with an annual fixed cost of $$1,500,000.$ At the moment no one

is sure how many Kayo computers the company can sell for the next year. The VP of Finance at Kayo

Computer has notified that this model of Kayo computer will be discontinued after next year and so any one$-$

time fee that might be paid to TCI must be justified based on one$-$year's sales alone. You will evaluate certain

economic and legal issue as part of your financial plan for the next year.

In reviewing the Apex contract, you note that it is requires Kayo to purchase at least $20\%$ of the PCBs used in

the Kayo computers sold $($and not less than $1,000$ PCBs$)$ from Apex. The contract also contains a liquidated

damages clause in the event of Kayo$$s default in the amount of $$1,000,000.$

You just received a market analysis report revealing that unit sales will depend on the price of the computer. At

the price of $$1,000,$ about $5,000$ units will be sold, but for every increase $($or decrease$)$ of $$100,$ sales will

decrease $($or increase, respectively$)$ by $1,000$ units.

Use Excel to build a spreadsheet analysis model that maximizes Kayo$$s profit next year, by finding $($a$)$ the

optimal price, and $($b$)$ the optimal number of boards to buy from Apex and from TCI while still honoring the

original contract with Apex.