A company will begin stocking remote control devices. Expected monthly demand is 800 units. The controllers can be purchased from either supplier A or supplier B. Their price lists are as follows.
1-199 / $14
200-499 / $13.80
500+ / $13.60
1-149 / $14.10
150-349 / $13.90
350+ / $13.70
Ordering cost is $40 and annual holding cost is 25% of unit price per unit. Which supplier should be used and what order quantity is optimal if the intent is to minimize the total annual cost?© BrainMass Inc. brainmass.com September 19, 2018, 2:59 am ad1c9bdddf - https://brainmass.com/business/strategy-and-business-analysis/quantity-discount-problem-graduate-level-39724
The attached file gives the Economic Order Quantity (EOQ) Calculation. The EOQ uses ordering cost which is $40, Annual Usage which is 800*12=9,600 and the carrying cost. The carrying cost ...
The solution explains how to choose between two suppliers so as to minimize the total cost