South Alabama Manufacturing Company has purchased a certain component part from Troy Part Company for $90 per part. As another alternative, a new supplier, Montgomery Part Company, is offering volume discounts for new customers of $100 per part for the first 1,500 parts ordered and $80 per part for each additional unit ordered. Recently, improvements in operations and reduce product demand have cleared up some capacity in South Alabama Manufacturing’s own plant for producing component parts. The particular part could be produced at $50 per part, with a fixed cost of $230,000. At what volume would each of the alternatives be preferred?
Show Total cost equation for each alternative.