Question: Logan Manufacturing has gone out on bid for a regular component. expected demand is 700 units per month. the item can be purchased from either allen manufacturing or baker manufacturing. their price lists are bellow. ordering cost is $50, and annual holding cost per unit is $5.
allen mfg. baker mfg.
qty price/per unit qty price per unit
1-499 $16.00 1-399 $16.10
500-999 $15.50 400-799 $15.60
1000+ $15.00 800+ $15.10
What is the optimal order quantity? which supplier should be used? why?