Question

A manufacturer purchases 6000 cases of a certain component for $100 per case from two suppliers: Supplier A and Supplier B. Supplier A is currently responsible for 1/2 of the total demand. The two suppliers currently pay $2 per case for transportation and achieve the same average delivery time of 10 days. However, for each day that a supplier can reduce the average delivery time, the manufacturer is willing to shift 5% of its total purchase to the supplier offering the premium service. A supplier earns a margin of 25% of the selling price on each case before transportation cost kicks in. How much profit does Supplier A make currently?

Answer 1

Answer:

Supplier A generates a profit of 75,000 after transportation cost.

Explanation:

Currnetly Supplier A is responsable for half the cases so:

6,000 x 1/2 = 3,000 cases are sold by A

each one is sold at 100 so 3,000 x 100 = 300,000

the margin is 25% of the selling price:

300,000 x 25% = 75,000

It has to pay $2 transportation cost per case:

3,000 cases x $2 = $6,000

Their profit after transportation cost:

75,000 - 6,000 = 69,000