Consider each of the following questions as a separate, unrelated day of business.
a) On Monday, you have a single request: Order A for 15,000 units. It must be fulfilled by a single factory. To which factory do you send the order? Explain your decision. Support your argument with numbers.
A. Wichita with $1.00 per unit.
B. Seattle with $0.75 per unit.
C. Omaha with $0.82 per unit.
Answer (2)
Calculate the total cost for Wichita: $1.00 \times 15,000 = $15,000.
Calculate the total cost for Seattle: $0.75 \times 15,000 = $11,250.
Calculate the total cost for Omaha: $0.82 \times 15,000 = $12,300.
Choose Seattle as it has the lowest total cost: $\boxed{\text{Seattle}}.
Explanation
Problem Analysis We need to determine the most cost-effective factory to fulfill an order of 15,000 units. We have three options: Wichita, Seattle, and Omaha, each with different per-unit costs. To make the best decision, we will calculate the total cost for each factory and choose the one with the lowest cost.
Cost Calculation To find the total cost for each factory, we multiply the number of units (15,000) by the cost per unit at each factory.
Wichita: Cost per unit = $1.00 Total cost = $1.00 \times 15,000 = $15,000
Seattle: Cost per unit = $0.75 Total cost = $0.75 \times 15,000 = $11,250
Omaha: Cost per unit = $0.82 Total cost = $0.82 \times 15,000 = $12,300
Cost Comparison Comparing the total costs:
Wichita: $15,000 * Seattle: $11,250
Omaha: $12,300 The lowest total cost is $11,250, which is the cost for Seattle.
Final Decision Therefore, to minimize the cost, the order should be sent to Seattle.
Examples
Imagine you're running a small business and need to purchase raw materials. You find three suppliers offering the same material but at different prices. By calculating the total cost from each supplier, just like we did with the factories, you can choose the most economical option. This ensures you keep your expenses down and maximize your profits. This type of cost analysis is crucial in many business decisions, from choosing suppliers to determining production costs.
The most cost-effective factory to fulfill the order of 15,000 units is Seattle, with a total cost of $11,250. This is lower than the costs from Wichita and Omaha. Hence, the order should be sent to Seattle.
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