A large producer of household products purchases a glyceride used in one of its deodorant soaps from outside of the company. It uses the glyceride at a fairly steady rate of 40 pounds per month, and the company uses a 23 percent annual interest rate to compute holding costs. The chemical can be purchased from two suppliers, A and B.

A offers the following all-units discount schedule:

Order Size Price per Pound 0  Q  500 $1.30 500  Q  1,000 1.20 1,000  Q 1.10 whereas B offers the following incremental discount schedule: $1.25 per pound for all orders less than or equal to 700 pounds, and $1.05 per pound for all incremental amounts over 700 pounds. Assume that the cost of order processing for each case is $150. Which supplier should be used?