Operations Management
Operations Management
11th Edition
ISBN: 9780132921145
Author: Jay Heizer
Publisher: PEARSON
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Chapter C, Problem 2DQ

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2. What are the steps in the intuitive lowest-cost method?

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Question and Observe: At what level of demand (number of units) per year would these two alternatives be equal? Graphically represent these two alternatives and their tradeoff point.
Question 4 b) Company ABC wishes to evaluate whether to produce a component internally or purchase from a vendor. The firm has the following options: Internal Production Process 1 Process 2 Purchase from Vendor Vendor 1 Vendor 2 Vendor 3 Variable cost of $17 per unit; annual fixed cost of $200,000 Variable cost of $14 per unit; annual fixed cost of $240,000 Offers a price of $20 per unit for any volume up to 30,000 units Offers a price of $22 per unit for 1,000 units or less, and $18 per unit for large quantities Offers a price of $21 per unit for the first 1,000 units and $19 per unit for additional units If the annual demand is 10,000 units, which alternative would be best from a cost standpoint? For 20,000 units, which alternative would be best?
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