Cow Spot Computer Co. out- sources the production of motherboards for its computers. It has narrowed down its choice of suppliers to two companies: Maji and Induk. Maji is an older company with a good reputation, while Induk is a newer company with cheaper prices. Given the difference in reputation, 5% of the motherboards will be inspected if they are purchased from Maji, but 25% of the motherboards will be inspected if they are purchased from Induk. The following data refers to costs associated with Maji and Induk.

REQUIRED
1. What is the relevant cost of purchasing from Maji and Induk?
2. What factors other than cost should Cow Spot consider?

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Maji Induk 50 Number of orders per year Annual motherboards demanded Price per motherboard Orde Inspection cost per unit Average inventory level Expected number of stockouts Stockout cost (cost of rush order) per stockout Units returned by customers for replacing motherboards Cost of replacing each motherboard Required annual return on investment Other carrying cost per unit per year 50 10,000 10,000 $93 $10 S5 100 units 100 S5 50 $25 10% $2.50 $90 S8 S5 100 units 300 S8 500 $25 10% $2.50 ring cost per order