Question
Company A purchases motherboard for PCs from Supplier X. The motherboards are consumed by a constant rate of 5 per week. The company operates 40
Company A purchases motherboard for PCs from Supplier X. The motherboards are consumed by a constant rate of 5 per week. The company operates 40 weeks a year. The cost of one motherboard is $8. The interest rate is 40%, which is also used as the holding cost rate of the company. The fixed cost of ordering is $80 per order. Company A is considering to purchase the motherboard from Supplier Y. The ordering cost and the unit cost of the motherboard remains the same. Differently, Supplier Y offers the option that the payment can be done 9 months later than the purchase, but the order quantity must be fixed to 200 units. Company A can only work with one supplier. Which supplier do you suggest to work with? If Company A chooses to work with Supplier Y, then what is the percentage cost penalty of not using the optimal order quantity?
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