Given the following information, use total cost analysis to determine which supplier is more cost-effective. Late delivery of raw material results in 60 percent lost sales and 40 percent back orders of finished goods.

Order lot size	1,000
Requirements (annual forecast)	120,000 units
Weight per engine	22 pounds
Order processing cost	$125/order
Inventory carrying rate	20% per year
Cost of working capital	10% per year
Profit margin	15%
Price of finished goods	$4,500
Back-order cost	$15 per unit

Unit Price	Supplier 1	Supplier 2
1 to 999 units/order	$50.00	$49.50
1000 to 2,999 units/order	$49.00	$48.50
3,000+ units/order	$48.00	$48.00
Tooling cost	$12,000	$10,000
Terms	2/10, net 30	1/10, net 30
Distance	125 miles	100 miles
Supplier Quality Rating	2%	2%
Supplier Delivery Rating	1%	2%

Truckload (TL ≥ 40,000 lbs):  $0.85 per ton-mile

Less-than-truckload (LTL):    $1.10 per ton-mile

Per ton-mile = 2,000 lbs per mile; number of days per year = 365