Bishop Solutions and Josiah Limited are two well established suppliers of inexpensive tools. EndYourWeek Projects is a national chain of retail outlets that caters to the occasional fixer-upper who would prefer to get the job done fast rather than investing in a well-appointed tool box. EndYourWeek Projects wants to find a supplier for a particular tool set that promises to be a big seller. Expected annual sales are 100,000 units. EndYourWeek’s warehouses operate 50 weeks a year. Management collected data on the two suppliers, which are contained in the first table.

a. Which of the two suppliers would provide the lowest annual cost to Weekend Projects? What shipping quantity would you suggest?

b. Before management could make a decision, another option became available. Corben Tools offered the tool set for only $8.00; however, the lead time is longer than the other two suppliers. Corben is a new supplier and has not been in the industry very long. Additional data for Corben are in the second table.

Management has begun to assess the administrative costs to manage the contract with Corben. What is the lowest level of administrative costs at which EndYourWeek Projects would be indifferent between using Corben versus the option you chose in part (a)?