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17 January, 15:49

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?

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  1. 17 January, 19:01
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    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
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