Smart Jeans Ltd. orders high-quality denim fabric from two different suppliers: Shine Fabrics and Soft Cotton. Smart would like to use only one of the suppliers in the future. Due to variations in quality, Smart would need to inspect 15% of Shine Fabrics’ 30-yard bolts (rolls) and 40% of Soft Cotton’s 30-yard bolts. The following data refer to costs associated with the two suppliers:

Required

1. What is the relevant cost of purchasing from Shine Fabrics and Soft Cotton?
2. What factors other than cost should Smart Jeans consider?

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Number of orders per year Annual bolts demanded Price per bolt Ordering cost per order Inspection cost per bolt Average inventory level Expected number of stockouts Stockout cost of rush order Estimated number of jeans returned by customers because of defective fabric Cost of fixing jeans returned by customers because of defective fabric Opportunity cost of investment Other carrying costs per bolt per year Shine Fabrics 100 3,200 $ 170 $ 200 $ 25 40 20 $ 25 150 $ 30 12% $ 15 Soft Cotton 100 3,200 $ 160 $ 250 $ 25 40 20 $ 20 250 $ 30 12% $15