Answer to Question #50176 in Management for sara

Question

A company has summarized the price list from four potential suppliers of an underground control valve. See the table below. Annual usage is 2,400 valves; order cost is $10 per order; and annual inventory holding cost is $3.33 per unit.
a) Which vendor should be selected and what order quantity is best if the company wants to minimize total cost.

Vendor A Vendor B
Quantity Price ($) Quantity Price ($)
1-49 35 1-74 34.75
50-74 34.75 75-149 34
75-149 33.44 150-299 32.8
150-299 32.35 300-499 31.6
300-499 31.15 500 + 30.5
500 + 30.75
Vendor C Vendor D
Quantity Price ($) Quantity Price ($)
1-99 34.5 1-199 34.25
100-199 33.75 200-399 33
200-399 32.5 400 + 31
400 + 31.1


b) If the holding cost is 50% of the purchase price. Find the vendor and the quantity with the minimum total cost.