A Company Is About to Select a Vendor for the Outsourcing

question 144

Essay

A company is about to select a vendor for the outsourcing of all of its engineering, environmental, and CAD requirements. It has identified four criteria critical to the selection. These criteria, and their importance weights, appear below. Three firms, A, C, and E, have indicated that they are interested in this position. The company has scored each of the three candidates on these criteria, using a 1-10 scale, where 10 is best. Candidate A scored 7, 7, 7, and 5 on the four criteria. Candidate C scored 9, 4, 8, and 6. Candidate E scored 5, 10, 10, and 7. Which vendor has the highest composite score?
$\begin{array}{|l|l|}\hline \text { Criterion } & \text { Weight } \\\hline \text { Engineering expertise } & .40 \\\hline \text { Financial and managerial strength } &. 20 \\\hline \text { Integrity } & .15 \\\hline \text { Staff experience and qualifications } & .25\\\hline\end{array}$

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Definitions:

Fixed Operating Expense

Financial obligations that stay the same irrespective of production or sales figures, encompassing rental charges, payroll, and insurance premiums.

High-Low Method

An accounting technique used to estimate the fixed and variable components of a cost based on the highest and lowest activity levels.

Least-Squares Regression

A statistical method used to determine the line of best fit by minimizing the sum of the squares of the vertical distances of the points from the line.

Least-Squares Regression

A statistical method used to determine the best-fitting line through a set of points, minimizing the sum of the squares of the distances of the points from the line.