Minimize total annual inventory costs

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Reference no: EM131032010

Thaarugo Inc produces a GPS device that is becoming popular in parts of Scandinavia. When Thaarugo produces one of these, a printed circuit board (PCB) is used and it is populated with several electronic components. Thaarugo determines that it need about 16,000 of this type of PCB each year. Demand is relatively constant throughout the year and the ordering cost is about $25/ order; the holding cost is 20% of the price of each PCB. Two companies are competing to become the dominant supplier of PCB, and both have offered quantity discounts as shown in the following table.

Which of the two suppliers should be selected if Thaarugo wishes to minimize total annual inventory costs? Explain.

Supplier A- Quantity Supplier A Price Supplier B- Quantity Supplier B Price

1-99 $38.40 1-299 $39.50

200-499 $35.80 300-999 $35.40

500 or more $34.70 1000 or more $34.60

Reference no: EM131032010

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