Determining the economic order quantity

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Company A uses an unstable chemical compound that must be kept in an environment where both temperature and humidity can be controlled. Company A uses 800 pounds per month of the chemical, estimates the holding cost to be 50% of the purchase price (because of spoilage), and estimates order costs to be $50 per order. The cost schedule of 2 suppliers are as follows:

Vendor 1     Vendor 2  
Quantity Price/lb   Quantity Price/lb
1-499 mce_markernbsp;   17.00   1-399 mce_markernbsp;   17.10
500-999 mce_markernbsp;   16.75   400-799 mce_markernbsp;   16.85
1000+ mce_markernbsp;   16.50   800-1199 mce_markernbsp;   16.60
      1200 + mce_markernbsp;   16.25

a) What is the economic order quantity for each supplier?
b) What quantity should be ordered, and which supplier should be used?
c) what is the total cost for the most economic order size?
d) what factor(s) should be considered besides total cost?

Reference no: EM13109773

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