A buyer receives bids and other relevant information from three suppliers for a vital component part for its latest product. Given the following information, use total cost analysis to determine which supplier should be chosen. Late delivery of the components results in 70 percent lost sales and 30 percent back orders of finished goods.

Order lot size	2000
Requirement (annual forecast)	240000 units
Weight per engine	40 pounds
Order processing cost	200/order
Inventory carrying rate	20% per year
Cost of working capital	10% per year
Profit margin	15%
Price finished goods	$10500
Back order cost	$120 per unit

Unit Price	Supplier 1	Supplier 2	Supplier 3
1 to 999 unit/order	$200	$25	$198
1000 to 2999 unit/ order	$195	$190	$192
3000+units/order	$190	$185	$190
Tooling Cost	$12000	$10000	$15000
Terms	2/10, Net 30	1/15, Net 30	1/10, Net 20
Distance	120 miles	100 miles	150 miles
Supplier Quality Rating	2%	1%	2%
Supplier Delivery Rating	1%	1%	2%

Truckload (TL >=40,000 lbs.): $0.95 per ton mile

Less than truckload (LTL): $1.20 per ton mile

Note: per ton mile= 2000lbs per mile; number of days per year= 365