A company purchases a single type of trolly for children for re-selling. The annual demand for trollies is 200. Due to safety regulations, a strict rule applies whereby a date is given by which a given seat has to be sold and installed in the supermarket. Trollies not sold by this date cannot be used or returned to the manufacturer. The holding cost of a trolly is estimated to be 20% of its purchasing cost.

Two manufacturers have offered to sell you seats according to the following conditions:

Manufacturer 1: Sells seats for $95 each and incurs a fixed ordering cost of $190 every time an order is made. The expiry date of the trolly is 0.21 years. The manufacturer will not accept orders less than 75 seats.

Manufacturer 2: Sells seats for $80 each and incurs a fixed ordering cost of $78.4 every time an order is made. The expiry date of the trolly is 0.12 years. The manufacturer will not accept orders less than 70 seats.

Using the EOQ model, which manufacturer should be chosen? Explain calculations and results.

EOQ=