Problem:

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 $$200$ 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$).$ Supplier $2$ has a $2$ percent defect rate which 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 elther supplier, but Supplier $2$ is further away so transportation costs are higherAnd because of the distance, delays in supplies reaching CompuTech are sometimes a problem. To ensure that a sufficient supply is on hand to keep production going. CompuTech must maintain a backup inventory $-$ and this increases inventory costs. CompuTech figures inventory costs$-$the expenses of finance and storage $-$ as a percentage of the total order cost.

To make its vendor analysis easier, CompuTech's purchasing agent has entered data about the two suppliers on a spreadsheet. He based his estimates on the quantity he thinks he will need over a full year.

Spreadsheet

The spreadsheet values outlined in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns $E$ and $F.$ Start by entering the initial values into columns $B$ and $C.$ Then review the questions below and adjust the values in columns $B$ and $C$ to determine the correct answers.

$\backslash$table$[[,$A$,$B$,$C$,$D$,$E$,$F$],[1,-,,,,,$Initial,,Initial$],[2,,$Supplier $1,$Supplier $2,,,$upplier $1,,$upplier $2],[3,$Quantity of Chips Needed,,,,,$100,000,,100,000],[4,$Cost per Chip,,,,$$,191,$$$,187],[5,$Cost for Total Order of Chips,,,,,$191,000\mathrm{.}00,$s$,187,000\mathrm{.}00$