Practice problem with 8 Questions (Supply Chain Management):

1. What is the Annual Purchase Cost?
2. What is the Annual Holding Cost? Round answer to nearest whole number.
3. For calculating freight cost, the freight rate would be _____ because (FTL/LTL) ____ is used.
4. What is the Annual Freight Cost? Round answer to nearest whole number.
5. Calculate the cost savings with Net 45 terms. Round answer to nearest whole number.
6. Calculate the cost savings with 2% 10 terms. Round answer to nearest whole number.
7. Which term should be used?
8. What is the TCO? Round answer to nearest whole number.

Things to consider

1. Answered. 8,100,000
2. What is the Annual Holding Cost? It is NOT 3,937,500
3. For calculating freight cost, the freight rate would be _____ because (FTL/LTL) ____ is used. DONT IGNORE THIS QUESTION
4. What is the Annual Freight Cost? is NOT 630,000
5. Calculate the cost savings with Net 45 terms. Is NOT 0
6. Calculate the cost savings with 2% 10 terms. Is NOT 162,000
7. Answered. 2% 10
8. What is the TCO? Is NOT 12,667,500

Question 1 Your company makes snow blowers and this winter they have been selling very well. You are evaluating a quote from a supplier for engines that power your snow blowers. The quote is as follows: Assume the following: Annual volume for engines is expected to be 90,000 units The price is constant regardless of volume or order quantity Inventory holding rate is 25% Working capital costs are 12% Your order quantity will always equal the minimum order quantity for the supplier Your freight rate is $1.75 per ton mile for a full truckload (40,000 lbs) and $2.00 for a less-thantruckload shipment There are 360 days in a year. There are 2000lbs/ ton Order costs, tooling costs, quality costs, late-delivery costs should be ignored. What is the total cost of ownership for supplier 1? (Show all your work.)