Thaarugo,inc, produces a GPS device that is becoming popular in parts of Scandinavia. When Thaarugo produces one of these, a printed circuit board (PCB) is used and it is populated with several electronic components. Thaarugo determines that it needs about 16,000 of this type of PCB each year. Demand is relatively constant throughout the year, and the ordering cost is about $25 per order, the holding cost is 20% of the price of each PCB. Two companies are competing to become the dominant supplier of the PCBs, and both have now offered discounts as shown in the following table. 

Supplier A                              Supplier B 

Quantity       Price                  Quantity      Price 

1-199            38.4                    1-299          39.5

200-499        35.8                   300-999     35.4 

500 or more   34.7             1,000 or more       34.6     

1. Which of the two suppliers should be selected if Thaarugo wishes to minimize total annual inventory cost?

2. What would be the annual inventory cost? 

Answer rating: 100% (QA)

To determine which supplier Thaarugo Inc should choose to minimize the total annual inventory cost and what that cost would be we need to calculate the total cost which includes the purchase cost of t... View the full answer