Machine A was purchased last year for $20,000 and had an estimated market value of $2,000 at the end of its 6-year useful life. Annual operating costs are $2,000. The machine will perform satisfactorily over the next 5 years. A salesperson for another company is offering a replacement, machine B , for $14,000 with a market value of $1,400 after 5 years. Annual operating costs for machine B will only be $1,400. A trade-in allowance of $10,400 has been offered for machine A. If the MARR is 12% per year, should you buy the new machine? Use RORAI method. Write a breif interpretation of your answer.

Machine A was purchased last year for $20,000 and had an estimated market value of $2,000 at the end of its 6-year useful life. Annual operating costs are $2,000. The machine will perform satisfactorily over the next 5 years. A salesperson for another company is offering a replacement, machine B , for $14,000 with a market value of $1,400 after 5 years. Annual operating costs for machine B will only be $1,400. A trade-in allowance of $10,400 has been offered for machine A. If the MARR is 12% per year, should you buy the new machine? Use RORAI method. Write a breif interpretation of your answer.

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

ChapterC: Cases

Section: Chapter Questions

Problem 5.3SD: Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling...

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Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. What should Sharon do in this situation?
Scenario 4 Sharon Gillespie, a new buyer at Visionex, Inc., was reviewing quotations for a tooling contract submitted by four suppliers. She was evaluating the quotes based on price, target quality levels, and delivery lead time promises. As she was working, her manager, Dave Cox, entered her office. He asked how everything was progressing and if she needed any help. She mentioned she was reviewing quotations from suppliers for a tooling contract. Dave asked who the interested suppliers were and if she had made a decision. Sharon indicated that one supplier, Apex, appeared to fit exactly the requirements Visionex had specified in the proposal. Dave told her to keep up the good work. Later that day Dave again visited Sharons office. He stated that he had done some research on the suppliers and felt that another supplier, Micron, appeared to have the best track record with Visionex. He pointed out that Sharons first choice was a new supplier to Visionex and there was some risk involved with that choice. Dave indicated that it would please him greatly if she selected Micron for the contract. The next day Sharon was having lunch with another buyer, Mark Smith. She mentioned the conversation with Dave and said she honestly felt that Apex was the best choice. When Mark asked Sharon who Dave preferred, she answered, Micron. At that point Mark rolled his eyes and shook his head. Sharon asked what the body language was all about. Mark replied, Look, I know youre new but you should know this. I heard last week that Daves brother-in-law is a new part owner of Micron. I was wondering how soon it would be before he started steering business to that company. He is not the straightest character. Sharon was shocked. After a few moments, she announced that her original choice was still the best selection. At that point Mark reminded Sharon that she was replacing a terminated buyer who did not go along with one of Daves previous preferred suppliers. What does the Institute of Supply Management code of ethics say about financial conflicts of interest?
The annual operating costs of Machine A are $2,000. The machine will perform satisfactorily over the next five years and has an estimated market value (MV) of $3,000 at the end of its useful life. A salesperson for another company is offering a replacement, Machine B, for $14,000, with a MV of $1,400 after five years. Annual operating costs for Machine B will only be $1,500. It is believed that $10,000 could be obtained for the old machine A if it were sold now. If the before-tax MARR is 10% per year, determine whether the old machine A should be replaced by the new machine B.
Gator Beach Marts, a chain of convenience grocery stores in the Fort Lauderdale area, has store hours that fluctuate from month to month as the tourist trade in the community varies. The utility costs for one of the company’s stores are listed below for the past six months. Required:1. Use the high-low method to estimate the cost behavior for the store’s utility costs. Express the cost behavior in formula form (Y = a + bX). What is the variable utility cost per hour of operation?2. Draw a scatter diagram of the store’s utility costs. Visually fit a cost line to the plotted data. Estimate the variable utility cost per hour of operation.3. Build a spreadsheet: Construct an Excel spreadsheet and use the Excel commands to perform a least-squares regression. Estimate the cost behavior for the store’s utility cost. Express the cost behavior in formula form. What is the variable utility cost per hour of operation?4. During July, the store will be open 300 hours. Predict the store’s total…
A company with 617 employees had the following expenses this year (2018): 14 hospitalizations, $5,600 Cost (each) What is the total cost of 14 hospitalizations?
Merrimac Manufacturing Company has always purchased acertain component part from a supplier on the East Coast for$50 per part. The supplier is reliable and has maintained thesame price structure for years. Recently, improvements in operations and reduced product demand have cleared up somecapacity in Merrimac’s own plant for producing componentparts. The particular part in question could be produced at$40 per part, with an annual fixed investment of $25,000.Currently, Merrimac needs 300 of these parts per year.a. Should Merrimac make or buy the component part?b. As another alternative, a new supplier located nearby isoffering volume discounts for new customers of $50per part for the first 100 parts ordered and $45 per partfor each additional unit ordered. Should Merrimacmake the component in-house, buy it from the newsupplier, or stick with the old supplier?c. Would your decision change if Merrimac’s annual demand increased to 2000 parts? increased to 5000 parts?d. Develop a set of…
Rubatex Corporation manufactures rubber and foam for a variety of products, including artificial turf housing and insulation, hockey helmet liners, scuba diving suits, sports sandals and mouse pads. The company was purchased by an investment firm called American industrial partners (AIP) that has so far earned only a 1 percent return on its investment. Obviously the company is having problems. Its sales are up but earnings are down. In the first three months after acquisition, the company lost $2 million on $68 million in sales. Understandably, AIP wants to know why and is demanding aggressive action. Employees at the Bedford, Virginia, plant say they know something’s wrong. The plant is hot and dirty and crumbling, and they are working harder to produce items of poorer quality. Fewer than 7 of 10 orders are shipped on time, and 2% of sales are returned as defective. Built in 1924, the plant sprawls over 14 buildings, with only the offices and lunchroom air-conditioned. Equipment is…
uestlon Help MacDonald Products, Inc., of Clarkson, New York, has the option of (a) proceeding immediately with production of a new top-of-the-line stereo TV that has just completed prototype testing or (b) having the value analysis team complete a study. If Ed Lusk, VP for operations, proceeds with the existing prototype (option a), the firm can expect sales to be 120,000 units at $580 each, with a probability of 0.41 and a 0.59 probability of 65,000 at $580. If, however, he uses the value analysis team (option b), the firm expects sales of 85,000 units at $730, with a probability of 0.71 and a 0.29 probability of 65,000 units at $730. Value engineering, at a cost of $90,000, is only used in option b. Which option has the highest expected monetary value (EMV)? The EMV for option a is $ and the EMV for option b is $ Therefore, option b has the highest expected monetary value. (Enter your responses as integers.)
A. Compute for the Customer Lifetime Value (CLV) of the following situations. 1. For every visit of Mrs. Uzumaki in her favorite boutique she spends P50,000.00 once a month for an unexpected time period of ten years. Answer: 2. An executive officer spends P3,000.00 for his lunch once a week for a period of five years. Answer: 3. Mr. Uchiha, an overseas employer, spends P200,000.00 for every package he spends quarterly for an unexpected time period of seven years. Answer:
CEO John Spychalski is concerned about a problem that has existed at CBN railroad for almost 20 years now. The continuous problem has been that the locomotives used by the company are not very reliable. Even with prior decisions to resolve the problem, there still has not been a change in the reliability of these locomotives. Between 2013 and 2014, 155 new locomotives were purchased and one of CBN's repair shops was reno- vated. The renovated shop has been very inefficient. Spychalski estimated that the shop would complete 300 overhauls on a yearly basis, but instead it has only managed to com- plete an average of 160 overhauls per year. The company has also been doing a poor job servicing customers (that is, providing equipment). CBN has averaged only 87 to 88 percent equipment availability, compared to other railroads with availability figures greater than 90 percent. Increased business in the rail industry has been a reason for trying to reduce the time used for repairing the…
As a regional sales manager, Nora Burke travels frequently and relies on her cell phone to keep up to date with clients. She has tried three different service providers, Airway, Bellular, and CyCom, with varying degrees of success. The number of failures in a typical eight-hour day and the average time to regain service are shown below. Nora’s contract is up for renewal. Which cellular service should she use? Cellular Co. Number of Failures Time to Regain Service Airway 10 2 minutes Bellular 8 4 minutes CyCom 3 10 minutes
Generate (1) specific example of superior performance that you have seen as a customer, and generate (1) example of poor business practice. Why and how do some companies inspire world-class service, while others fail?