1. The purchasing manager of a distillery company is consideringthree sources of supply for oak barrels. The first supplier offersany quantity of barrels at `150 each. The second supplier offersbarrels in lots of 150 or more at `125 per barrel. The thirdsupplier offers barrels in lots of 250 or more at `100 each. Thedistillery uses 1,500 barrels a year at constant rate. Carryingcosts are 40 percent of purchase price, and it costs the purchasingagent `400 to place an order. Calculate the total annual cost forthe orders placed to the probable suppliers, and find out thesupplier to whom the orders should be placed.
2. A company uses 8,000 units of a product as a raw material,costing `10 per unit. The administrative cost per purchase is `40.The holding costs are 28% of the average inventory. The company isfollowing an optimal purchase policy and places orders according tothe EOQ. It has been offered a quantity discount of 1% if itpurchases its entire requirement only four times a year. Should thecompany accept the offer of quantity discount of one percent? Ifnot what minimum discount should the company demand?
3. Chris Sandvig Irrigation has summarized the price list fromfour potential suppliers of an underground valve given in the tablebelow. Annual usage is 2400 valve, order cost is `10 per order andannual inventory holding cost are `3.33 per unit. Which vendorshould be selected and what order quantity is best if SandvigIrrigation wants to minimize total cost?

Vendor A		Vendor B
Quantity	Price (`)	Quantity	Price (`)
1-49	35.00	1-74	34.75
50-74	34.75	75-149	34
75-149	33.55	150-299	32.80
150-299	32.35	300-499	31.60
300-499	31.15	500+	30.50
500+	30.75
Vendor C		Vendor D
Quantity	Price (`)	Quantity	Price (`)
1-99	34.50	1-199	34.25
100-199	33.75	200-399	33.00
200-399	32.50	400+	31.00
400+	31.10

4. MP VanOyen Manufacturing has gone out on bid for a regularcomponent. Expected demand is 700 units per month. The item can bepurchased from either Allen Manufacturing or Baker Manufacturing.Their price lists are shown in the table. Ordering cost is `50 andthe annual holding cost per unit is`5.

Allen manufacturing		Baker manufacturing
Quantity	Unit Price	Quantity	Unit Price
1-499	`16	1-399	`16.10
500-999	`15.50	400-799	`15.60
1000+	`15.00	800+	`15.10

1. What is the economic order quantity?
2. Which supplier should be used and why?
3. What is optimal order quantity and total annual cost ofordering, purchasing and holding the component?
   5. Radovilsky Manufacturing Company in Hayward, California, makesflashing lights for toys. The company operates its productionfacility 300 days per year. It has orders for about 12000 flashinglights per year and has the capability of producing 100 per day.Setting up the light production costs `50. The cost of each lightis `1. The holding costs is `0.10 per light per year.
      1. What is the optimal size of the production run?
      2. What is the average holding cost per year?
      3. What is the average set up cost per year?
      4. What is the total cost per year including the cost of thelights?