Your company assembles five different models of a motor scooter that is sold in specialty stores in the U.S. The company uses the same engine for all five models. You have been given the assignment of choosing a supplier for these administrative restrictions, you must order the engines in lot size of 1,050 units. Because of the unique characteristics of the engine, special tooling is needed during he manufacturing process for which you agree to reimburse the supplier. Your assistant has obtained quotes from two reliable engine suppliers and you eed to decide which to use.

Requirements (annual forecast) 12,600 units

Weight per engine 25 lbs

Order processing cost $165 per order

Inventory carry cost 20% of the average value of inventory per year.

lot size is in inventory on average (1,050/2=525

Two qualified suppliers have submitted the following quotations:

Order quantity Supplier 1 unit price Supplier 2 unit price

1 to 1,499 units/order $534 $532

1,500 to 2,999 units/order 530 532

3,000 + units/order 529 526

Tooling costs 27,000 24,800

Distance 130 miles 100 miles

Note: Per ton-mile=2,000 lbs per mile

1. Calculate the total cost for each supplier (round to the nearest whole number)

Total cost: Supplier 1? Supplier 2?

Which supplier would you select Supplier 1 or 2?