The Green Machine Manufacturing Company is trying to decide which of two suppliers to purchase engines from. Green Machine has agreed to cover the tooling cost for the supplier selected. The relevant information is provided below. Carry all calculations out to two decimal places. Order lot size 2,500 units
Annual demand 120,000 units
Engine weight 10 pounds
Order processing cost $100 / order
Inventory carrying rate 1% per year
Supplier 1 Supplier 2
Unit Price 1 to 999 units / order $315.00 $320.00
Unit Price 1000 to 2999 units / order $306.00 $309.00
Unit Price 3000 + units / order $300.00 $305.00
Tooling Cost $13,500 $10,750
Distance 110 miles 125 miles
Supplier defect rate (% of engine cost) 2% 1%
Truckload (TL ≥ 40,000 lbs.): $1.05 per ton-mile
Less-than-truckload (LTL): $1.75 per ton-mile
(Note: per ton-mile = 2,000 pounds per mile
What is the total cost of ownership for supplier 1 and 2?