Problem:
The Burdell Wheel and Tire Company assembles tires to wheel rims for use on cars during manufacture of vehicles by the automotive industry. Burdell wants to locate a low-cost supplier for the tires he uses in his assembly operation. The supplier will be selected based on total annual cost to supply Burdell's needs. Burdell's annual requirements are for 25,000 tires, and the company operates 250 days a year. The following data are available for two suppliers being considered.
See the below table. Show work.
Supplier Shipping Annual Price/ Annual Lead Annual
Quantity Shipping Unit Holding Time Administrative
Costs Cost/Unit (days) Cost
Lexington Tire 2,000 $18,000 $40 $8.00 8 $14,000
Irmo Auto 1,000 $24,000 $41 $8.20 5 $18,000
Using the Total Cost Analysis for Supplier Selection, which supplier should Burdell choose? Provide details to justify your answer.