A large producer of household products purchases a glyceride used in one of its deodorant soaps from
Question:
A large producer of household products purchases a glyceride used in one of its deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40 pounds per month, and the company uses a 23 percent annual interest rate to compute holding costs. The chemical can be purchased from two suppliers, A and B. A offers the following all-units discount schedule:
Order Size | Price per Pound |
0 ≤Q 500 | $1.30 |
500 ≤ Q 1,000 | 1.20 |
1,000 ≤ Q | 1.10 |
whereas B offers the following incremental discount schedule: $1.25 per pound for all orders less than or equal to 700 pounds, and $1.05 per pound for all incremental amounts over 700 pounds. Assume that the cost of order processing for each case is $150. Which supplier should be used?
Statistics Principles and Methods
ISBN: 978-0470904114
7th edition
Authors: Richard A. Johnson, Gouri K. Bhattacharyya