Adelie Enterprises (from Problem 9) has decided to drop the International Supplier from consideration. Further-more, Adelie has decided to order boxes in lots of 10,000 in order to optimize the use of available storage space at its distribution facility. In order to more completely consider the cost/volume tradeoffs associated with selecting the local or national supplier, management has collected the following data. Adelie services its customers 250 days per year.

a. On purely a total cost basis, which supplier should be selected if there is low demand for Adelie’s new service; which supplier should be selected under moderate demand assumptions; under high demand?
b. Which supplier achieves the lowest expected cost if the probability of low demand is 35 percent, moderate demand is 45 percent, and high demand is 20percent?

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Freight Carrying Lead Time Administrative Demand Level Demand Price/unit Cost/1,000 Cost/unit (days) costs 1$15,000.00 Moderate100,000$1.25 $20.00 0.0 $%15,000.00 High 250,000 $1.25$20.00$0.10$15,000.00 50,000 $1.35 $120.00 0.1015$12,500.00 Moderate100,000$1.25 $120.00 $00 5 $12,500.00 High 250,000 $1.00 $120.000.10 15$12,500.00 Local Supplier Low 50,000 $1.25$20.00 $0.10 National SupplierLow