Problem 1. Harley purchases from Supplier A are priced at $5 each and used at

Problem 1. Harley purchases from Supplier A are priced at $5 each and used at the rate of 20000

units per month. Components purchased from supplier B are priced at $4 each and are used at the

rate of 2500 units per month. Components purchased from supplier C are priced at $5 each and

used at the rate of 900 units per month. Currently Harley purchases a separate truckload from

each supplier. As part of its JIT drive Harley has decided to aggregate purchases from the three

suppliers. The trucking company charges a fixed cost of $400 for the truck with an additional

charge of $100 for each stop. Thus if Harley asks for a pickup from only one supplier the

trucking company charges $500; from two suppliers it charges $600; and from three suppliers it

charges $700. Harley incurs a holding cost of 20 percent per year.

(a) If Harley aggregates purchases from all three suppliers what is the cycle inventory of

each component and what is the total annual cost excluding material cost?

(b) If Harley orders separately from each supplier. What is the cycle inventory and total

annual cost excluding material cost?