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liers of an item. This perspective, considering ed, is called the Total Cost of Ownership. Com sts than we will consider in the following exam ed in Minneapolis, sources the fabric used for has decided to compare pricing on a black ro Reign must decide between a fabric provider e, South Carolina. Use the chart below to find ide which provider should be utilized to provic 0.00 Graniteville, SC $ 3,000.00

liers of an item. This perspective, considering ed, is called the Total Cost of Ownership. Com sts than we will consider in the following exam ed in Minneapolis, sources the fabric used for has decided to compare pricing on a black ro Reign must decide between a fabric provider e, South Carolina. Use the chart below to find ide which provider should be utilized to provic 0.00 Graniteville, SC $ 3,000.00

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Oftentimes businesses need to consider additional costs beyond simply the price of a good or service when considering between two suppliers of an item. This perspective, considering more than just the price of the good or service purchased, is called the Total Cost of Ownership. Companies often should and do consider many more costs than we will consider in the following example. Purple Reign, an apparel manufacturer located in Minneapolis, sources the fabric used for clothes from outside vendors. Recently, Purple Reign has decided to compare pricing on a black roll of fabric used to manufacture 10,000 t-shirts. Purple Reign must decide between a fabric provider located in Bangladesh versus one located in Graniteville, South Carolina. Use the chart below to find a TCO from each provider to help Purple Reign decide which provider should be utilized to provide the black fabric. Cost of Fabric Transportation Freight movement Customs Duties Ordering Costs Quality Costs (i.e. scrap/rework) PROVIDER Bangladesh Greater than $3,400 $ 1,250.00 $ 3,000.00 Graniteville, SC $ 1,750.00 $ $ 150.00 $ 150.00 $ Less than or equal to 3,000 Greater than $3,000 but less than or equal to $3,200 Greater than $3,200 but less than or equal to $3,400 375.00 50.00 2.5% of cost of fabric 1% of cost of fabric What is the TCO of the provider that offers Purple Reign the lowest cost to acquire the black fabric?
Transcribed Image Text:Oftentimes businesses need to consider additional costs beyond simply the price of a good or service when considering between two suppliers of an item. This perspective, considering more than just the price of the good or service purchased, is called the Total Cost of Ownership. Companies often should and do consider many more costs than we will consider in the following example. Purple Reign, an apparel manufacturer located in Minneapolis, sources the fabric used for clothes from outside vendors. Recently, Purple Reign has decided to compare pricing on a black roll of fabric used to manufacture 10,000 t-shirts. Purple Reign must decide between a fabric provider located in Bangladesh versus one located in Graniteville, South Carolina. Use the chart below to find a TCO from each provider to help Purple Reign decide which provider should be utilized to provide the black fabric. Cost of Fabric Transportation Freight movement Customs Duties Ordering Costs Quality Costs (i.e. scrap/rework) PROVIDER Bangladesh Greater than $3,400 $ 1,250.00 $ 3,000.00 Graniteville, SC $ 1,750.00 $ $ 150.00 $ 150.00 $ Less than or equal to 3,000 Greater than $3,000 but less than or equal to $3,200 Greater than $3,200 but less than or equal to $3,400 375.00 50.00 2.5% of cost of fabric 1% of cost of fabric What is the TCO of the provider that offers Purple Reign the lowest cost to acquire the black fabric?
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