Ans:- Cost to the consumer = $200. Markup for retailer = 70%. So cost to the ret
ID: 373050 • Letter: A
Question
Ans:- Cost to the consumer = $200.
Markup for retailer = 70%. So cost to the retailer = 100%-70% of $200 = 30% of $200=$60
Similarly for wholesaler, cost to wholesaler = 30% of $60 = $18 and so on till the Manufacturer (Since at each previous node markup % is 70%)
Cost to exporter = 0.30*$18 = $5.4
Cost to the manufacturer = 0.3*$5.4 = $1.62
Now in 1 Supplier scenario cost to Supplier = 0.3*$1.62 = $0.486
In 2 Suppliers scenario cost to each supplier =$0.243
Now, since breakup of the Bill of Materials at components level is not provided we can assume that one supplier or 2 suppliers provide the same components and in case of 2 suppliers each of the 2 provides exactly half of components as a single dedicated supplier would have provided.
Let us take that when only 1 supplier gives he raw material, volume of raw materials = 2x
Similarly, when 2 suppliers are considered they each supply volume of raw materials = x
Quantity discount for 2x materials = 30%. For 2 lots of x only, no such discount is mentioned.
Using quantity discount we have cost to manufacturer in (1-0.3)*$1.62 =0.7*1.62 = $1.134 in case of 2x from only 1 supplier.
In case of 2 suppliers cost to maufacturer is $1.62/2 =$0.81 from each supplier
Hence, it is preferable to go for 1 supplier in case to get benefit of quantity discount as it will be cheaper. However, if there are inventory considerations figures for which are not provided in the question, the answer may or may not vary.
Explanation / Answer
Based on the cost point of the bill of material, should the manufacturer opt for one or two suppliers (show costs). The 2x quantity discount is 30%. Pays the Required % Supply ChainNode Below Mark-up Nodes Consumer Retailer Wholesaler Exporter Manufacturer $200 70% 70% 70% | 70% Cost of the B of M 1 Supplier 2 Suppliers