If the Edwards production plan for the next period includes 1000 units of component 1 and 800 units of component 2, what purchases do you recommend

Answer and Explanation:

The computation is shown below:

Particulars          Supplier  

                          1         2          3          Overall

Component 1             1000                  1000

Component 2   650   50       100         800

From the above table the component 1 should be ordered to supplier 2 as the price is lesser in this case and also it is able to supply total production needed as per the component 1

In addition to this, the component 2 should be ordered to supplier 1 for 650 units as the price is lesser and the remaining balance could be ordered from supplier 2 or  3 as the prices are similar

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