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Sunflowers Inc. has used two different suppliers and is considering which one to choose to buy materials from for next year. Supplier A offers
Sunflowers Inc. has used two different suppliers and is considering which one to choose to buy materials from for next year. Supplier A offers a fixed price of $10 per unit of material. Supplier B offers two pricing tiers: when the total number of units ordered is less than or equal to 100 units, the unit price is $11, and once the total number of units ordered reaches 100, per unit price for the units exceeding 100 units is $9. Sunflowers expects its demand for materials next year will be either 180 units with a probability of 60% or 220 units with a probability of 40%. If Sunflowers wants to minimize the material cost, which supplier should Sunflowers choose, and what is the expected material cost to pay to the chosen supplier?
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