QUANTITY DISCOUNT PROBLEM 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 Supplier A Supplier B Quantity Unit Price Quantity Unit Price 1 199 $14 00 1 149 $14 10 200 499 13 80 150 349 13 90 500 13 60 350 13 70 Ordering cost is $40 and annual holding cost is 25 percent of the unit price Which supplier should be used and what order quantity is optimal if the intent is to minimize total annual cost

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Question: QUANTITY DISCOUNT PROBLEM A company will begin stocking remote control devices. Expected monthly demand is 800 units. The controllers can be purchased from either supplier

QUANTITY DISCOUNT PROBLEM

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:

Supplier A		Supplier B
Quantity	Unit Price	Quantity	Unit Price
1 199	$14.00	1 149	$14.10
200-499	13.80	150-349	13.90
500+	13.60	350+	13.70

Ordering cost is $40 and annual holding cost is 25 percent of the unit price. Which supplier should be used and what order quantity is optimal if the intent is to minimize total annual cost?

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