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M.P VanOyen Manufacturin has gone out in bid for a regulator component. Expected demand is 700 units per month. The item can be purchased from either Allen or Baker. Their prices are listed below. Ordering cost is $50 and annual holding cost per unit is $5.
Allen Baker
Qty Unit price Qty Unit price
1-499 $16 1-399 $16.10
500-999 $15.50 400-799 $15.60
1000+ $15 800+ $15.10
a. What is the economic order quantity?
b. WHich supplier should be used? why?
c. What is the optimal order quantity and total annual cost of ordering, purchasing, and holding the component?
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