1. Use the following information to determine which supplier for steering wheels is more cost-effective using total cost analysis. Late delivery of the component results in 50% lost sales and 50% back orders of finished goods.

Table 1

Order lot size	400
Annual Requirements	4,800 units
Weight per steering wheel	20 pounds
Order processing cost	$125
Inventory carrying rate	20% per year
Cost of working capital	10% per year
Profit margin	20%
Price of finished golf cart	$5,000
Back order cost	$15 per unit

Table 2

Unit Price	Supplier A	Supplier B
1 to 999 units/order	$48	$47
1000 to 2,999 units/order	$47	$46
Tooling cost	$1000	$1000
Terms	2/10 net 30	1/10, net 30
Distance	120 miles	100 miles
Supplier Quality Rating (defects)	3%	2%
Supplier Delivery Rating (late)	1%	2%

Here is the freight rates for

Truckload (TL 40,000 lbs): $0.90 per ton-mile

Truckload Less-than-truckload (LTL): $1.10 per ton-mile

Note: per ton-mile = 2,000 lbs. per mile; number of days per year = 365