I30-77

Question

The company’s CEO has established the following guidelines for approving new equipment vendors:
 
1. The vendor must have minimum assets of $1.5 million.
 
2. The vendor must purchase electrical components from either ABB or Schneider.
 
3. The vendor must have at least 5 years of experience in the industry.
 
4. The vendor must provide at least two client references from Fortune 500 companies.The company is evaluating four vendors for an upcoming equipment purchase. The table below shows each vendor’s quoted price for the equipment, shipping cost, and the cost of spare parts to be purchased with the equipment.
    Vendor    Equipment Price    Shipping Cost    Spare Parts Cost       Vendor A   $510,000    $10,000    $25,000       Vendor B   $470,000    $30,000    $20,000       Vendor C   $515,000    $15,000    $20,000       Vendor D   $490,000    $20,000    $23,000To ensure compliance with company policy, the team reviewed each vendor against the CEO’s guidelines. The table below summarizes each vendor’s qualifications.
    Vendor    Assets (in $M)    Electrical Supplier   Experience   Fortune 500 Ref.      Vendor A   50    ABB    10 years   3      Vendor B   20   ABB   7 years   1      Vendor C   10   Schneider    5 years   2      Vendor D   12   Rio Motors   8 years   3

Bunuel · Answer

Official Solution:

• Considering both the CEO’s guidelines and total project cost, Vendor A is the lowest-cost vendor that meets all of the CEO’s guidelines. 
 
Vendor A and Vendor C are the only vendors that meet all CEO guidelines. Vendor A's total cost is $545,000, while Vendor C's is $550,000.
 
Therefore, Vendor A is the lowest-cost vendor that meets all of the CEO’s guidelines. Answer: True.
 
 • Vendor A has the lowest shipping-to-equipment price ratio. 
 
We need the lowest shipping-to-equipment price ratio. A has the lowest shipping cost (numerator) and the second highest equipment price (denominator) after C. So, C is the only contender. A's shipping-to-equipment price ratio is 10,000 / 510,000 ≈ 0.0196. C's shipping-to-equipment price ratio is 15,000 / 515,000 ≈ 0.0291. A's ratio is lower. Answer: True.
 
 • Two vendors do not satisfy the CEO’s electrical supplier requirement. 
 
Only Vendor D uses an unapproved supplier (Rio Motors). Vendors A, B, and C use ABB or Schneider, as required. Answer: False.

Correct answer:

Considering both the CEO’s guidelines and total project cost, Vendor A is the lowest-cost vendor that meets all of the CEO’s guidelines.  "True"

Vendor A has the lowest shipping-to-equipment price ratio.  "True"

Two vendors do not satisfy the CEO’s electrical supplier requirement.  "False"

kdipayan · Answer

One of the eligibility criteria is also that "The vendor must provide at least two client references from Fortune 500 companies."
Vendor B provides only 1 reference. Hence B also disqualifies.
Hence, 
Two vendors do not satisfy the CEO’s electrical supplier requirement is True

Bunuel · Answer

Read more carefully. The statement refers only to the electrical supplier requirement, not overall eligibility. Vendor B fails the Fortune 500 references rule, but ABB is an approved supplier. Only Vendor D uses an unapproved supplier, so the statement is False.

GoldWaffle · Answer

I don’t quite agree with the solution. Vendor B can not satisfy CEO's requirement because it does not show at least 2 forunte 500 references

Bunuel · Answer

Vendor B does fail the CEO’s overall eligibility requirements because it has only one Fortune 500 reference. However, Statement 3 asks only about the  electrical supplier requirement .

Vendor B uses ABB, which satisfies that requirement. Only Vendor D fails the electrical supplier requirement, so the statement is  False .

Bunuel · Answer

This MSR question and its solutions have been completely revised and improved.

I30-77

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Vendor	Equipment Price	Shipping Cost	Spare Parts Cost
Vendor A	$510,000	$10,000	$25,000
Vendor B	$470,000	$30,000	$20,000
Vendor C	$515,000	$15,000	$20,000
Vendor D	$490,000	$20,000	$23,000

Vendor	Assets (in $M)	Electrical Supplier	Experience	Fortune 500 Ref.
Vendor A	50	ABB	10 years	3
Vendor B	20	ABB	7 years	1
Vendor C	10	Schneider	5 years	2
Vendor D	12	Rio Motors	8 years	3

True	False
		Considering both the CEO’s guidelines and total project cost, Vendor A is the lowest-cost vendor that meets all of the CEO’s guidelines.
		Vendor A has the lowest shipping-to-equipment price ratio.
		Two vendors do not satisfy the CEO’s electrical supplier requirement.