Chapter 2 - Total Cost of Ownership example solution

Chapter 2 - Total Cost of Ownership example solution - =...

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9/21/11 11 TCO – Total Cost of Ownership Supplier 1 is lower total cost even though unit price was slightly higher than Supplier 2. Description Supplier 1 Total Engine Cost 12,000 units * $500 /unit = $6,000,000 Tooling Cost = $22,000 Transportation Cost (22,000 Lb = LTL) 125 miles * 12,000 units *22 lb/unit *$1.20/2000 lb mile = $19,800 Ordering Cost [12,000 units/(1000 units/order)] *$125/order = $1,500 Carrying Cost (1000 units)/2) *$500/unit * 20% = $50,000 Quality Cost $6,000,000 * 2%
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Unformatted text preview: = $120,000 TOTAL = $6,213,300 Description Supplier 2 Total Engine Cost 12,000 units * $498 /unit = $5,976,000 Tooling Cost = $20,000 Transportation Cost (22,000 Lb = LTL) 100 miles * 12,000 units *22 lb/unit *$1.20/2000 lb mile = $15,840 Ordering Cost [12,000 units/(1000 units/order)] *$125/order = $1,500 Carrying Cost (1000 units)/2) *$498/unit * 20% = $49,800 Quality Cost $5,976,000 * 3% = $179,280 TOTAL = $6,242,420 Slides used in class...
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This note was uploaded on 09/21/2011 for the course SCM 301 taught by Professor Montabon during the Fall '11 term at Iowa State.

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