Question

Chris Sandviq Irrigation, Inc., has summarized the price list from 3 potential suppliers of an underground control valve as shown in Table 6. Annual usage is 2,400 valves, order cost is $10 per order, and annual inventory holding costs are $%3.33 per unit. Determine which vendor should be selected. Justify your selection. Table 6 VENDORA VENDOR B VENDOR C QUANTITYPRICE() QUANTITY PRICE ($) 34.75 34.00 32.80 31.60 30.50 QUANTITY 1-99 100-199 200-399 400+ PRICE ($) 34.50 33.75 32.50 31.10 1-49 1-74 75-149 150-299 300-499 500+ 35 50-7434 75 75-14933.55 32.35 31.15 30.75 150-299 300-499 500+

Answer 1

First we have to calculate the Economic Ordering Quantity:
EOQ = SquareRoot[(2*Annual Requirement * Ordering cost)/Holding cost]
EOQ = SQRT[(2*2400*10) / 3.33]
EOQ = 120.06 valves
The price of valve to supply 120 valves per order :
Vendor A	33.55
Vendor B	34
Vendor C	33.75
So, "VENDOR A" SHOULD BE SELECTED BEING LOWEST COST.