Question: Taking Discounts Universal Technologies, Inc. has identified two qualified vendors with the capability to supply some of its electronic components. For the coming year, Universal has estimated its volume requirements for these components and obtained price-break schedules from each vendor. (These are summarized as "all-units" discounts in the table below.) Universal's engineers have also estimated each vendor's maximum capacity for producing these components, based on available information about equipment in use and labor policies in effect. Finally, because of its limited history with Vendor A, Universal has adopted a policy that permits no more than 60% of its total unit purchases on these components to come from Vendor A.
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Vendor A
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Vendor B
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Product
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Requirement
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Unit price
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Volume required
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Unit price
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Volume required
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1
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500
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$225
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0-250
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$224
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0-300
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$220
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250-500
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$214
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300-500
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2
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1000
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$124
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0-600
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$120
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0-1000
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$115
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600-1000
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(no discount)
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3
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2500
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$60
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0-1000
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$54
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0-1500
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$56*
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1000-2000
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$52
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1500-2500
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$51
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2000-2500
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Total capacity (units)
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2500
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2000
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*For example, if 1400 units are purchased from Vendor A, they cost $56 each, for a total of $78,400.
1) What is the minimum-cost purchase plan for Universal?
2) Suppose that Vendor A provides a new price-discount schedule for component 3. This one is an "incremental" discount, as opposed to an "all-units" discount, as follows.
- Unit price = $60 on all units up to 1000
- Unit price = $56 on the next 1000 units
- Unit price = $51 on the next 500 units
- With the change in pricing at Vendor A, what is the minimum purchasing cost for Universal?