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A large producer purchases a special kind of oil, used in one of its products from suppliers. It uses this oil at a fairly steady
A large producer purchases a special kind of oil, used in one of its products from suppliers. It uses this oil at a fairly steady rate of 40 pounds per month, and the company uses a ( p ) percent annual interest rate to compute holding costs. The oil can be purchased from two suppliers, A and B. Company A offers the following all-units discount schedule: On the other hand, B offers the following incremental discount schedule: $(y1) per pound for all orders less than or equal to 700 pounds, and $(y2) 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 and what should be the replenishment order size
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