Chris Sandvig Irrigation, Inc., has summarized the price list from four potentia

Question

Chris Sandvig Irrigation, Inc., has summarized the price list from four potential suppliers of an underground control valve. See the table below. Annual usage is 900 valves; order cost is $6 per order, and annual inventory holding costs are $7.55 per unit. Vendor A Vendor B Vendor C Vendor D Qu 1-9 10-14 15-49 50-99 100-299 300+ Price $35.00 34.75 33.55 32.35 31.15 30.75 Qu 1-14 15-49 50-99 100-299 300+ Price $34.75 34.00 32.80 31.60 30.50 Quan 1-24 25-74 75-199 200+ Pricc $34.50 33.75 32.50 31.10 Quan 1-74 75-199 200+ Pricc S34.25 33.00 31.00 Which vendor should be selected and what order quantity is best if Sandvig Irrigation wants to minimize total cost? Chris Sandvig Irrigation should orderunits at a time from V(enter your response as a whole number) Vendor D Vendor E Vendor C Vendor A

Explanation / Answer

Annual usage is 900 valves. Hence monthly usage is 75 valves. To minimize inventory holding cost 75 units can be ordered.

IF 75 valves are to be ordered the cost with vendor A is minimum

Cost with vendor A - 75*32.35

Cost with vendor B - 75*32.8

Cost with vendor C - 75*32.5

Cost with vendor D - 75*33

Hence 75 units to be ordered from Vendor A

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