A company will begin stocking remote control devices. Expected monthly demand is

Question

A company will begin stocking remote control devices. Expected monthly demand is 820 units. The controllers can be purchased from either supplier A or supplier B. Their price lists are as follows:

SUPPLIER A

SUPPLIER B

Ordering cost is $47 and annual holding cost is 32 percent of unit price per unit.

What order quantity is optimal if the intent is to minimize total annual costs?

A company will begin stocking remote control devices. Expected monthly demand is 820 units. The controllers can be purchased from either supplier A or supplier B. Their price lists are as follows:

Explanation / Answer

We need to choose Supplier A

What order quantity is optimal if the intent is to minimize total annual costs? 500

Supplier A Supplier B Quantity Unit Price Quantity Unit Price 1-199 $14 1-149 $14.10 200-499 $13.80 150-349 $13.90 500+ $          13.40 350+ $13.60 Ordering Cost $47 Annual Holding Cost 32% Supplier A 820 $          13.40 $ 10,988.00 Total cost: $ 14,551.16 Supplier B 820 $          13.60 $ 11,152.00 Total cost $ 14,767.64

We need to choose Supplier A

What order quantity is optimal if the intent is to minimize total annual costs? 500

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