Peach Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates in the two companies, 5% of motherboards purchased from Alpha will be inspected and 25% of motherboards purchased from Beta will be inspected. The following data refer to costs associated with Alpha and Beta:

Required
1. What is the relevant cost of purchasing from Alpha and Beta?
2. What factors other than cost should Peachconsider?

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Number of orders per year Annual motherboards demanded Price per motherboard Ordering cost per order Inspection cost per unit Average inventory level Expected number of stockouts Stockout cost (cost of rush order) per stockout Units returned by customers for replacing motherboards Cost of replacing each motherboard Required annual return on investment Other carrying cost per unit per year 100 units 100 $4 50 S30 10% $3.50 Alpha 50 10,000 $108 $13 Beta 50 10,000 $105 $10 $6 100 units 300 500 $30 10% 3.50