The purchasing agent for Jack Spaniel Distillery is considering three sources of supply for oak barrels in which the distillerys fine sour-mash bourbon is aged. The first supplier offers any quantity of barrels at $125 each. The second supplier offers barrels in lots of 80 or more at $120. The third supplier offers barrels in lots of 150 or more at $118 each. The distillery uses 1,500 barrels a year at constant rate. Carrying costs are 20 percent and it costs the purchasing agent $75 to place an order. From which source should the distillery buy its barrels? What will be the total annual cost of buying the barrels, carrying inventory and performing the necessary purchasing operations?