Which of the two suppliers should be selected if Thaarugo wishes to minimize total annual inventory… 1 answer below »

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

SUPPLIER A

Supplise B

QUANTITY

PRICE

QUANTITY

PRICE

1–199

38.40

1–299

39.50

200–499

35.80

300–999

35.40

500 or more

34.70

1000 or more

34.60

 

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