Eight Flags operates several amusement parks in the Midwest. The company stocks machine oil to service the machinery for the many rides at the parks. Eight Flags needs 30,000 gallons (D) of oilannually; the parks operate 50 weeks a year. Management is unsatisfied with the current supplier of oil and has obtained two bids from other suppliers. The data are contained in the following table.
Annual Freight Costs
Shipping Quantity (Q)
Supplier
5,000
10,000
15,000
Price/Unit (p)
Annual Holding Cost/Unit (H)
Lead Time (L) (wks)
Annual Administrative Cost
Sharps
$5,000
$3,600
$3,300
$3.70
$0.74
5
$5,000
Winkler
$5,600
$4,100
$3,600
$3.90
$0.78
3
$4,000
Which supplier and which shipping quantity will provide the lowest costs for Eight Flags?
Using and a shipping quantity of is the lowest cost alternative, with annual total costs to Eight Flags of $ .