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Pegasus Motors Corp. has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pittsburgh. Engines are transported using trucks from Roadway Inc., which costs $4,000 per trip. The motorcycle plant opens 50 weeks a year and 5 days a week. Each business day the plant produces 800 motorcycles. The holding cost for each engine is $ 100 per year. How often should Pegasus transport engines and in what quantity? Supercheap Inc. offered to transport engines for Pegasus with the following pricing policy: for each trip a fixed $1,000 is charged; if the amount of engines transported is more than 2,500 then each additional engine is charged an extra $3. Will Pegasus save money by using Supercheap Inc.? If yes, how much can Pegasus save?
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