Home office building services is evaluating their supplier of casters. Casters are needed at fairly steady...

Home office building services is evaluating their supplier of casters. Casters are needed at fairly steady rate of 40 per month. They use an interest rate of 23% annually to compute holding costs and an order costs $150. The current supplier cost structure is such that their average annual cost is $780. They are considering a new supplier with the following cost structure where the cost per unit is applied to the entire order.

If Q is less than 500, then $1.25/unit; if Q is equal to or greater than 500 and less than 1000, then $1.1/unit; and if Q is equal to or greater than 1000, then $1.05 per unit.

a) If they switched to the new supplier, what is the order size that minimizes average annual costs?

b) Is the cost of the new supplier preferable to that of the current supplier?

Expert Solution

PLEASE RATE THE ANSWER, IT TAKES ALMOST 1 hour to solve the calculations..

Solution:

PLEASE RATE THE ANSWER, IT TAKES ALMOST 1 hour to solve the calculations..

keosha answered 11 months ago

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Home office building services is evaluating their supplier of casters. Casters are needed at fairly steady...

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