A large producer of household products purchases a glyceride used in one of its deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40 pounds per month, and the company uses a 23 percent annual interest rate to compute holding costs. The chemical can be purchased from two suppliers, A and B. A offers the following all-units discount schedule: Price per Pound $1.30 Order Size O

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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A large producer of household products purchases a glyceride used in one of its
deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate
of 40 pounds per month, and the company uses a 23 percent annual interest rate to
compute holding costs. The chemical can be purchased from two suppliers, A and B. A
offers the following all-units discount schedule:
Order Size
Price per Pound
0 <Q< 500
500< Q<1,000
1,000 <Q
$1.30
1.20
1.10
whereas B offers the following incremental discount schedule: $1.25 per pound for all
orders less than or equal to 700 pounds, and $1.05 per pound for all incremental amounts
over 700 pounds. Assume that the cost of order processing for each case is S150. Which
supplier should be used?
Transcribed Image Text:A large producer of household products purchases a glyceride used in one of its deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40 pounds per month, and the company uses a 23 percent annual interest rate to compute holding costs. The chemical can be purchased from two suppliers, A and B. A offers the following all-units discount schedule: Order Size Price per Pound 0 <Q< 500 500< Q<1,000 1,000 <Q $1.30 1.20 1.10 whereas B offers the following incremental discount schedule: $1.25 per pound for all orders less than or equal to 700 pounds, and $1.05 per pound for all incremental amounts over 700 pounds. Assume that the cost of order processing for each case is S150. Which supplier should be used?
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