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Question: Company X can purchase a certain component from either Supplier A or Supplier B. Supplier A offers an incremental quantity discount, while Supplier B offers an all-unit quantity discount.
To be specific, Supplier A charges $250 per unit for the first 1,000 units in an order, $240 per unit for the next 1,000 units in the order, and $230 per unit for any unit beyond. Supplier B charges $250 per unit for orders of no more than 2,000 units and $240 per unit for any bigger orders.
(a) Suppose Company X decides to buy 3,000 units from Supplier A. What is the average unit cost of the order?
(b) If Company X wants to place an order of 4,000 units, which supplier offers a lower total cost?
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